Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
(Mark one)
ýQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017
¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _________to_________
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ________
Commission File Number 1-8052Number: 001-08052
torchmarklogocolora01rgba18.jpg
TORCHMARK CORPORATIONGLOBE LIFE INC.
(Exact name of registrant as specified in its charter)
DELAWAREDelaware63-0780404
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3700 South Stonebridge Drive, McKinney, Texas75070
(Address of principal executive offices)(Zip Code)
3700 South Stonebridge Drive, McKinney, Texas 75070
(Address of principal executive offices) (Zip Code)

(972) 569-4000
(Registrant’s telephone number, including area code (972) 569-4000code)
NONE
(Former name, former address and former fiscal year, if changed since last report.report)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $1.00 par value per shareGLNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d)15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                 Yes    ☒   No   ☐
Yesý No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yesý☒No¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, ora non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerý☒Accelerated filer¨☐
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
☐		Smaller reporting company¨☐
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ☐   No   ☒
Yes¨Noý
Indicate the number of shares outstanding for each of the issuer’s classes of common stock, as of the last practicable date.
ClassCLASSOUTSTANDING AT October 31, 2017Outstanding at April 28, 2021
Common Stock,
$1.00 $1.00 Par Value
115,446,832103,053,356


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Globe Life Inc.
INDEX
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets
1
Condensed Consolidated Statements of Operations
2
Condensed Consolidated Statements of Comprehensive Income (Loss)
3
Condensed Consolidated Statements of Shareholders' Equity
4
Condensed Consolidated Statements of Cash Flows
5
Page
PART I. FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets
1
Condensed Consolidated Statements of Operations
2
Condensed Consolidated Statements of Comprehensive Income
3
Condensed Consolidated Statements of Shareholders' Equity
4
Condensed Consolidated Statements of Cash Flows
5
Notes to Condensed Consolidated Financial Statements
6
Note 1—Significant Accounting Policies
6
Note 2—New Accounting Standards
67
Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income
8
Note 4—Investments
10
Note 5—Discontinued Operations
15
Note 6—Commitments and Contingencies
1621
Note 7—6—Liability for Unpaid Claims
1723
Note 8—7—Postretirement Benefits Plans
1924
Note 9—8—Earnings Per Share
2026
Note 10—9—Business Segments
2027
31
Item 2.
2732
Item 3.
4860
Item 4.
4860
Item 1.
4960
Item 1A.
4961
Item 2.
4961
Item 6.
4962
63










As used in this Form 10-Q, “Globe Life,” the “Company,” “we,” “our” and “us” refer to Globe Life Inc., a Delaware corporation incorporated in 1979, its subsidiaries and affiliates.
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PART I–I—FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements

TORCHMARK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollar amounts in thousands)
 September 30,
2017		 December 31,
2016
Assets:
  
Investments:   
Fixed maturities—available for sale, at fair value (amortized cost: 2017—$14,914,580; 2016—$14,188,050)$16,652,913
 $15,245,861
Policy loans523,318
 507,975
Other long-term investments70,096
 53,852
Short-term investments65,482
 72,040
Total investments17,311,809
 15,879,728
Cash88,462
 76,163
Accrued investment income238,278
 223,148
Other receivables389,084
 384,454
Deferred acquisition costs3,911,800
 3,783,158
Goodwill441,591
 441,591
Other assets544,011
 520,313
Assets related to discontinued operations68,572
 127,532
Total assets$22,993,607
 $21,436,087
Liabilities:   
Future policy benefits$13,298,069
 $12,825,837
Unearned and advance premiums61,536
 64,017
Policy claims and other benefits payable318,832
 299,565
Other policyholders' funds97,016
 96,993
Total policy liabilities13,775,453
 13,286,412
Current and deferred income taxes payable2,069,158
 1,743,990
Other liabilities492,175
 413,760
Short-term debt309,002
 264,475
Long-term debt (estimated fair value: 2017—$1,243,232; 2016—$1,233,019)1,130,806
 1,133,165
Liabilities related to discontinued operations49,328
 27,424
Total liabilities17,825,922
 16,869,226
Commitments and Contingencies (Note 6)

 
Shareholders’ equity:   
Preferred stock, par value $1 per share—Authorized 5,000,000 shares; outstanding: -0- in 2017 and 2016—
 —
Common stock, par value $1 per share—Authorized 320,000,000 shares; outstanding: (2017—127,218,183 issued, less 11,859,162 held in treasury and 2016—127,218,183 issued, less 9,187,075 held in treasury)127,218
 127,218
Additional paid-in capital508,386
 490,421
Accumulated other comprehensive income1,039,302
 577,574
Retained earnings4,239,582
 3,890,798
Treasury stock, at cost(746,803) (519,150)
Total shareholders’ equity5,167,685
 4,566,861
Total liabilities and shareholders’ equity$22,993,607
 $21,436,087

See accompanying Notes to Condensed Consolidated Financial Statements.Statements

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Globe Life Inc.



TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCondensed Consolidated Balance Sheets
(Unaudited)
(Dollar amounts in thousands, except per share data)
March 31,
2021		December 31, 2020
Assets:
Investments:
Fixed maturities—available for sale, at fair value (amortized cost: 2021—$17,411,959;
2020—$17,197,145, allowance for credit losses: 2021— $0; 2020— $3,346)
$20,154,910 $21,213,509 
Policy loans584,297 584,379 
Other long-term investments (includes: 2021—$459,707; 2020—$385,038 under the fair value option)619,741 546,981 
Short-term investments93,348 107,782 
Total investments21,452,296 22,452,651 
Cash81,504 94,847 
Accrued investment income268,384 248,991 
Other receivables477,596 474,180 
Deferred acquisition costs4,662,509 4,595,444 
Goodwill441,591 441,591 
Other assets729,016 739,027 
Total assets$28,112,896 $29,046,731 
Liabilities:
Future policy benefits$15,433,249 $15,243,536 
Unearned and advance premium68,817 61,728 
Policy claims and other benefits payable398,190 399,507 
Other policyholders' funds98,251 97,968 
Total policy liabilities15,998,507 15,802,739 
Current and deferred income taxes1,586,288 1,833,723 
Short-term debt274,919 254,918 
Long-term debt (estimated fair value: 2021—$1,799,129; 2020—$1,871,754)1,668,322 1,667,886 
Other liabilities752,523 716,373 
Total liabilities20,280,559 20,275,639 
Commitments and Contingencies (Note 5)00
Shareholders' equity:
Preferred stock, par value $1 per share—5,000,000 shares authorized; outstanding: 0 in 2021 and 20200 0 
Common stock, par value $1 per share—320,000,000 shares authorized; outstanding: (2021—113,218,183 issued; 2020—113,218,183 issued)113,218 113,218 
Additional paid-in-capital516,013 527,435 
Accumulated other comprehensive income (loss)2,024,515 3,029,244 
Retained earnings6,020,552 5,874,109 
Treasury stock, at cost: (2021—10,025,038 shares; 2020—9,420,699 shares)(841,961)(772,914)
Total shareholders' equity7,832,337 8,771,092 
Total liabilities and shareholders' equity$28,112,896 $29,046,731 
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Revenue:       
Life premium$576,223
 $546,415
 $1,725,896
 $1,639,156
Health premium242,991
 236,987
 730,557
 709,936
Other premium3
 9
 9
 34
Total premium819,217
 783,411
 2,456,462
 2,349,126
Net investment income213,872
 202,720
 634,930
 601,415
Realized investment gains (losses)12,595
 3,482
 6,142
 7,780
Other income331
 160
 1,140
 963
Total revenue1,046,015
 989,773
 3,098,674
 2,959,284
        
Benefits and expenses:       
Life policyholder benefits386,445
 369,546
 1,168,383
 1,101,748
Health policyholder benefits155,774
 153,351
 470,104
 459,387
Other policyholder benefits9,000
 9,255
 26,923
 27,475
Total policyholder benefits551,219
 532,152
 1,665,410
 1,588,610
Amortization of deferred acquisition costs122,334
 116,821
 370,363
 352,872
Commissions, premium taxes, and non-deferred acquisition costs67,863
 61,153
 198,011
 185,609
Other operating expense63,019
 57,805
 187,788
 173,080
Interest expense20,970
 20,381
 62,825
 62,860
Total benefits and expenses825,405
 788,312
 2,484,397
 2,363,031
        
Income before income taxes220,610
 201,461
 614,277
 596,253
Income taxes(67,264) (59,551) (183,390) (181,475)
Income from continuing operations153,346
 141,910
 430,887
 414,778
        
Income (loss) from discontinued operations, net of tax(12) 9,959
 (3,739) (447)
Net income$153,334
 $151,869
 $427,148
 $414,331
        
Basic net income (loss) per common share:   
   
Continuing operations$1.32
 $1.19
 $3.69
 $3.44
Discontinued operations—
 0.08
 (0.03) —
Total basic net income per common share$1.32
 $1.27
 $3.66
 $3.44
        
Diluted net income (loss) per common share:   
   
Continuing operations$1.29
 $1.16
 $3.61
 $3.38
Discontinued operations—
 0.09
 (0.03) —
Total diluted net income per common share$1.29
 $1.25
 $3.58
 $3.38
        
Dividends declared per common share$0.15
 $0.14
 $0.45
 $0.42






See accompanying Notes to Condensed Consolidated Financial Statements.

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Globe Life Inc.
TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollar amounts in thousands)
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Net income$153,334
 $151,869
 $427,148
 $414,331
        
Other comprehensive income (loss):       
Unrealized investment gains (losses):       
Unrealized gains (losses) on securities:       
Unrealized holding gains (losses) arising during period83,216
 236,040
 692,747
 1,397,181
Reclassification adjustment for (gains) losses on securities included in net income(12,910) (3,513) (13,264) (7,809)
Reclassification adjustment for amortization of (discount) and premium119
 (927) (379) (3,495)
Foreign exchange adjustment on securities recorded at fair value1,173
 (199) 1,418
 849
Unrealized gains (losses) on securities71,598
 231,401
 680,522
 1,386,726
Unrealized gains (losses) on other investments473
 1,685
 3,544
 3,568
Total unrealized investment gains (losses)72,071
 233,086

684,066

1,390,294
Less applicable tax (expense) benefit(25,225) (81,583) (239,479) (486,573)
Unrealized investment gains (losses), net of tax46,846
 151,503
 444,587
 903,721
        
Unrealized gains (losses) attributable to deferred acquisition costs505
 621
 (992) (4,829)
Less applicable tax (expense) benefit(177) (216) 347
 1,691
Unrealized gains (losses) attributable to deferred acquisition costs, net of tax328
 405
 (645) (3,138)
        
Foreign exchange translation adjustments, other than securities8,533
 120
 16,049
 7,262
Less applicable tax (expense) benefit(2,986) (16) (4,567) (2,454)
Foreign exchange translation adjustments, other than securities, net of tax5,547
 104
 11,482
 4,808
        
Pension adjustments:       
Amortization of pension costs3,108
 2,551
 9,326
 7,654
Experience gain (loss)—
 —
 371
 791
Pension adjustments3,108
 2,551
 9,697
 8,445
Less applicable tax (expense) benefit(1,087) (894) (3,393) (2,957)
Pension adjustments, net of tax2,021
 1,657
 6,304
 5,488
        
Other comprehensive income (loss)54,742
 153,669
 461,728
 910,879
Comprehensive income (loss)$208,076
 $305,538
 $888,876
 $1,325,210

See accompanying Notes to Condensed Consolidated Financial Statements.

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TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYOperations
(Unaudited)
(Dollar amounts in thousands, except per share data)

  Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Shareholders’ Equity
               
Balance at January 1, 2016 $—
 $130,218
 $482,284
 $231,947
 $3,614,369
 $(403,266) $4,055,552
Comprehensive income (loss) 
 
 
 910,879
 414,331
 
 1,325,210
Common dividends declared ($0.42 per share) 
 
 
 
 (50,410) 
 (50,410)
Acquisition of treasury stock 
 
 
 
 
 (311,356) (311,356)
Stock-based compensation 
 
 13,787
 
 (2,224) 8,771
 20,334
Exercise of stock options 
 
 

 
 (42,040) 89,093
 47,053
Balance at September 30, 2016 $—
 $130,218
 $496,071
 $1,142,826
 $3,934,026
 $(616,758) $5,086,383
               
               
               
  Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Shareholders’ Equity
               
Balance at January 1, 2017 $—
 $127,218
 $490,421
 $577,574
 $3,890,798
 $(519,150) $4,566,861
Comprehensive income (loss) 
 
 
 461,728
 427,148
 
 888,876
Common dividends declared ($0.45 per share) 
 
 
 
 (52,304) 
 (52,304)
Acquisition of treasury stock 
 
 
 
 
 (301,448) (301,448)
Stock-based compensation 
 
 17,965
 
 (606) 7,450
 24,809
Exercise of stock options 
 
 

 
 (25,454) 66,345
 40,891
Balance at September 30, 2017 $—
 $127,218
 $508,386
 $1,039,302
 $4,239,582
 $(746,803) $5,167,685
Three Months Ended
March 31,
20212020
Revenue:
Life premium$708,119 $649,630 
Health premium294,173 280,205 
Other premium1 0 
Total premium1,002,293 929,835 
Net investment income235,820 228,991 
Realized gains (losses)28,152 (26,097)
Other income295 325 
Total revenue1,266,560 1,133,054 
Benefits and expenses:
Life policyholder benefits517,631 421,670 
Health policyholder benefits187,829 178,711 
Other policyholder benefits7,259 7,588 
Total policyholder benefits712,719 607,969 
Amortization of deferred acquisition costs152,993 143,837 
Commissions, premium taxes, and non-deferred acquisition costs79,666 78,937 
Other operating expense81,210 78,582 
Interest expense21,178 20,808 
Total benefits and expenses1,047,766 930,133 
Income before income taxes218,794 202,921 
Income tax benefit (expense)(40,277)(37,381)
Net income
$178,517 $165,540 
Basic net income per common share
$1.73 $1.54 
Diluted net income per common share
$1.70 $1.52 





























See accompanying Notes to Condensed Consolidated Financial Statements.

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Globe Life Inc.
TORCHMARK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCondensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(Dollar amounts in thousands)

 Nine Months Ended September 30,
 2017 2016
Cash provided from operating activities$1,085,842
 $971,926
    
Cash provided from (used for) investing activities:   
Investments sold or matured:   
Fixed maturities available for sale—sold52,951
 75,299
Fixed maturities available for sale—matured, called, and repaid306,132
 178,873
Other long-term investments3,523
 466
Total long-term investments sold or matured362,606
 254,638
Acquisition of investments:   
Fixed maturities—available for sale(1,042,705) (910,090)
Other long-term investments(16,775) (20,404)
Total investments acquired(1,059,480) (930,494)
Net increase in policy loans(15,343) (6,623)
Net (increase) decrease in short-term investments6,556
 (11,138)
Net change in payable or receivable for securities—
 94
Additions to property and equipment(13,451) (10,138)
Sale of other assets18
 767
Investment in low-income housing interests(13,852) (16,126)
Cash provided from (used for) investing activities(732,946) (719,020)
    
Cash provided from (used for) financing activities:   
Issuance of common stock40,891
 47,053
Cash dividends paid to shareholders(51,532) (50,258)
Proceeds from issuance of debt—
 400,000
Payment for debt issuance costs—
 (9,638)
Repayment of debt(1,250) (250,000)
Net borrowing (repayment) of commercial paper42,652
 25,266
Acquisition of treasury stock(301,448) (311,356)
Net receipts (payments) from deposit-type product(65,912) (57,188)
Cash provided from (used for) financing activities(336,599) (206,121)
    
Effect of foreign exchange rate changes on cash(3,998) (3,268)
Net increase (decrease) in cash12,299
 43,517
Cash at beginning of year76,163
 61,383
Cash at end of period$88,462
 $104,900
Three Months Ended
March 31,
20212020
Net income
$178,517 $165,540 
Other comprehensive income (loss):
Investments:
Unrealized gains (losses) on fixed maturities:
Unrealized holding gains (losses) arising during period(1,262,059)(977,936)
Other reclassification adjustments included in net income(17,142)28,412 
Foreign exchange adjustment on fixed maturities recorded at fair value2,442 (2,397)
Unrealized gains (losses) on fixed maturities(1,276,759)(951,921)
Unrealized gains (losses) on other investments0 (10,720)
Total unrealized investment gains (losses)(1,276,759)(962,641)
Less applicable tax (expense) benefit268,119 202,150 
Unrealized gains (losses) on investments, net of tax(1,008,640)(760,491)
Deferred acquisition costs:
Unrealized gains (losses) attributable to deferred acquisition costs359 383 
Less applicable tax (expense) benefit(75)(80)
Unrealized gains (losses) attributable to deferred acquisition costs, net of tax284 303 
Foreign exchange translation:
Foreign exchange translation adjustments, other than securities(610)(27,442)
Less applicable tax (expense) benefit128 5,763 
Foreign exchange translation adjustments, other than securities, net of tax(482)(21,679)
Pension:
Pension adjustments5,200 4,157 
Less applicable tax (expense) benefit(1,091)(873)
Pension adjustments, net of tax4,109 3,284 
Other comprehensive income (loss)(1,004,729)(778,583)
Comprehensive income (loss)
$(826,212)$(613,043)



















See accompanying Notes to Condensed Consolidated Financial Statements.

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TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSCondensed Consolidated Statements of Shareholders' Equity
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)



Preferred StockCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockTotal Shareholders' Equity
Balance at December 31, 2020
$0 $113,218 $527,435 $3,029,244 $5,874,109 $(772,914)$8,771,092 
Comprehensive income (loss)— — — (1,004,729)178,517 — (826,212)
Common dividends declared
($0.1975 per share)
— — — — (20,435)— (20,435)
Acquisition of treasury stock— — — — — (132,720)(132,720)
Stock-based compensation— — (11,422)— 1,168 18,142 7,888 
Exercise of stock options— — — — (12,807)45,531 32,724 
Balance at March 31, 2021
$0 $113,218 $516,013 $2,024,515 $6,020,552 $(841,961)$7,832,337 



Preferred StockCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockTotal Shareholders' Equity
Balance at December 31, 2019
$0 $117,218 $531,554 $1,844,830 $5,551,329 $(750,624)$7,294,307 
Cumulative effect of change in accounting principles, net of tax(1)
— — — — (454)— (454)
Balance at January 1, 2020
0 117,218 531,554 1,844,830 5,550,875 (750,624)7,293,853 
Comprehensive income (loss)— — — (778,583)165,540 — (613,043)
Common dividends declared
($0.1875 per share)
— — — — (19,963)— (19,963)
Acquisition of treasury stock— — — — — (166,729)(166,729)
Stock-based compensation— — (12,126)— (482)21,964 9,356 
Exercise of stock options— — — — (9,539)26,347 16,808 
Balance at March 31, 2020
$0 $117,218 $519,428 $1,066,247 $5,686,431 $(869,042)$6,520,282 
(1)Adoption of Accounting Standard Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on January 1, 2020.




















See accompanying Notes to Condensed Consolidated Financial Statements.

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Table of Contents

Globe Life Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollar amounts in thousands)
Three Months Ended
March 31,
20212020
Cash provided from (used for) operating activities
$371,830 $343,554 
Cash provided from (used for) investing activities:
Investments sold or matured:
Fixed maturities available for sale—sold61,858 50,360 
Fixed maturities available for sale—matured or other redemptions36,683 167,387 
Other long-term investments3,733 231 
Total investments sold or matured102,274 217,978 
Acquisition of investments:
Fixed maturities—available for sale(295,869)(211,754)
Other long-term investments(65,997)(49,896)
Total investments acquired(361,866)(261,650)
Net (increase) decrease in policy loans82 (3,641)
Net (increase) decrease in short-term investments14,434 (234,316)
Additions to properties(15,529)(9,316)
Other investing activities0 13 
Investments in low-income housing interests(9,080)(20,743)
Cash provided from (used for) investing activities
(269,685)(311,675)
Cash provided from (used for) financing activities:
Issuance of common stock32,724 16,808 
Cash dividends paid to shareholders(19,511)(18,588)
Repayment of debt0 (1,875)
Net borrowing (repayment) of commercial paper20,001 158,764 
Acquisition of treasury stock(132,720)(166,729)
Net receipts (payments) from deposit-type products(13,811)(19,651)
Cash provided from (used for) financing activities
(113,317)(31,271)
Effect of foreign exchange rate changes on cash(2,171)13,829 
Net increase (decrease) in cash(13,343)14,437 
Cash at beginning of year94,847 75,933 
Cash at end of period$81,504 $90,370 













See accompanying Notes to Condensed Consolidated Financial Statements.

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GL Q1 2021 FORM 10-Q
Table of Contents
Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 1—Significant Accounting Policies

Business: (Globe Life), (the Company), refer to Globe Life Inc., an insurance holding company incorporated in Delaware in 1979, and Globe Life Inc. subsidiaries and affiliates. Globe Life Inc.'s direct or indirect primary subsidiaries are Globe Life And Accident Insurance Company, American Income Life Insurance Company, Liberty National Life Insurance Company, Family Heritage Life Insurance Company of America, and United American Insurance Company. The underwriting companies are owned by their ultimate corporate parent, Globe Life Inc. (the Parent Company).

Globe Life provides a variety of life and supplemental health insurance products and annuities to a broad base of customers. The Company is organized into 4 reportable segments: life insurance, supplemental health insurance, annuities, and investments.

Basis of Presentation: The accompanying condensed consolidated financial statements of Torchmark Corporation (Torchmark or alternatively, the Company)Globe Life have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all of the annual disclosures required by accounting principles generally accepted in the United States of America (GAAP). for annual financial statements. However, in the opinion of management, these statements include all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of the condensed consolidated financial position at September 30, 2017,March 31, 2021, and the condensed consolidated results of operations, comprehensive income, and cash flows for the periods ended September 30, 2017March 31, 2021 and 2016.2020. The interim period condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements that are included in the Form 10-Kfiled with the Securities Exchange Commission (SEC) on February 27, 2017.25, 2021.
Note 2—New Accounting Standards
Accounting Pronouncements Not Yet Adopted
ASU 2016-01: In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which primarily revises the classification and measurement of certain equity investments such that they will be measured at fair value through net income. Additionally, it eliminates the cost method for partnerships and joint ventures and requires these types of investments to be accounted for under the fair value through net income method or equity method. Lastly, the guidance will require certain disclosures associated with fair value of financial instruments. This standard will become effective for the Company beginning January 1, 2018. The adoption will not have a significant impact on the financial statements as we have limited ownership in equity investments and partnerships, representing less than 1% of total invested assets.
ASU 2016-02: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires all lessees to report a right-of-use asset and a lease liability for leases with a term life greater than 12 months. Operating and financing leases will be recognized on the balance sheet going forward. Additional qualitative and quantitative disclosures will be required. This standard will become effective for the Company beginning January 1, 2019 and will require recognizing and measuring leases at the beginning of the earliest period presented using a modified retrospective approach. Early adoption is permitted. The Company does not expect the adoption to have a significant impact on the financial statements. Refer to the 2016 Form 10-K Note 15—Commitments and Contingencies for consideration of the noncancellable operating lease commitments. The Company does not have any lessor commitments.
ASU 2016-13: In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments as well as to change the loss impairment methodology for available-for-sale debt securities. This standard will become effective on January 1, 2020. The applicable section of the standard related to debt securities requires a prospective transition. The Company does not expect the adoption to have a significant impact on the financial statements as we have limited credit losses with respect to our available-for-sale portfolio.
ASU 2016-15: In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments to provide uniformity in the classification of cash receipts and payments recorded in the statement of cash flows including debt prepayment or debt extinguishment costs, settlement of zero-coupon bonds, and proceeds from the settlement of insurance claims. This standard will become effective on January 1, 2018 and will not have a significant impact on the financial statements.
ASU 2016-16: In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. This guidance was issued to improve the accounting for income tax consequences of intra-entity transfers of assets other than inventory by allowing the immediate recognition of the current and deferred income tax effects. Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity transfer until the asset has been sold to an outside party. This new guidance should be applied on a modified retrospective



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GL Q1 2021 FORM 10-Q
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 2—New Accounting Standards (continued)



Accounting Pronouncements Adopted in the Current Year
StandardDescriptionEffective DateEffect on the Consolidated Financial Statements
ASU No. 2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs
The standard was issued as an amendment to ASU 2017-08, and clarifies that callable debt securities with a premium should be amortized to the next call date.This standard became effective on January 1, 2021.The adoption of this standard did not have a material impact on the consolidated financial statements.


Accounting Pronouncements Yet to be Adopted
StandardDescriptionEffective DateEffect on the Consolidated Financial Statements
ASU No. 2018-12/2019-09/2020-11, 
Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, with clarification guidance issued in November 2019 and 2020.
ASU 2018-12 is a significant change to our current accounting and disclosure of long-duration contracts, which is our primary business. The guidance was primarily issued to: 1) improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows, 2) simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, 3) simplify the amortization of deferred acquisition costs, and 4) improve the effectiveness of the required disclosures.As a result of the issuance of ASU 2020-11 in November 2020, the effective date for this standard was changed to January 1, 2023. Early adoption is available.
The Company is currently in the process of evaluating the impact this standard will have on the consolidated financial statements and disclosures, specifically assessing key accounting policies, assumption and data inputs, controls, and enhanced system solutions.

As of the balance sheet date, the Company is continuing to upgrade its valuation systems as part of its implementation plan. In addition, significant progress has been made allowing the Company to execute parallel valuation runs on major blocks of business and is updating its accounting policies. Due to the overall nature of the standard, the impact on the consolidated financial statements is expected to be significant. At this time, the Company does not have an estimate of the impact. The Company does not expect to early adopt this ASU and has selected a modified retrospective transition method.


7
GL Q1 2021 FORM 10-Q

approach and will become effective on January 1, 2018. This adoption will not have a significant impact on the financial statements.
ASU 2017-04:In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance was issued to simplify the subsequent measurement of goodwill through the elimination of Step 2 from the goodwill impairment test which required a hypothetical purchase price allocation. It will become effective on January 1, 2020 and should be applied on a prospective basis. This adoption will not have a significant impact on the financial statements.
ASU 2017-07: In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This guidance was issued to simplify the reporting of pension costs by disaggregating the service-cost component from the other components of net benefit costs and reporting it separately on the income statement. The service-cost component is the only component of net benefit cost that will be eligible for capitalization. The guidance will become effective on January 1, 2018 with a retrospective transition method for separation of net benefit costs and a prospective transition method for the capitalization of service costs. The Company does not expect the adoption to have a significant impact on the financial statements as the change in pension capitalization should be less than 1% of Total Benefits and Expenses on the Consolidated Statement of Operations for the year.
ASU 2017-08: In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. This guidance was issued to shorten the amortization period for certain callable debt securities held at a premium. The guidance requires the premium to be amortized to the earliest call date. It will become effective on January 1, 2019 with early adoption permitted, including during interim periods. The adoption is to be applied on a modified retrospective basis through an adjustment to retained earnings. This adoption will not have a significant impact on the financial statements.
ASU 2017-09: In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This guidance was issued to provide clarity and guidance regarding changes to the terms or conditions of a share-based payment award that requires an entity to apply modification accounting. It will become effective on January 1, 2018 with early adoption permitted, including adoption in any interim periods. The Company does not expect the adoption to have a significant impact on the financial statements as modifications to stock compensation are infrequent.



7
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)


Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income


Components of Accumulated Other Comprehensive Income: An analysis of the change in balance by component of Accumulated Other Comprehensive Income is as follows for the three and nine month periods ended September 30, 2017March 31, 2021 and 2016.2020:

Components of Accumulated Other Comprehensive Income

 Three Months Ended March 31, 2021
 Available
for Sale
Assets		Deferred
Acquisition
Costs		Foreign
Exchange		Pension
Adjustments		Total
Balance at January 1, 2021
$3,175,572 $(4,704)$23,302 $(164,926)$3,029,244 
Other comprehensive income (loss) before reclassifications, net of tax(995,098)284 (482)0 (995,296)
Reclassifications, net of tax(13,542)0 0 4,109 (9,433)
Other comprehensive income (loss)(1,008,640)284 (482)4,109 (1,004,729)
Balance at March 31, 2021
$2,166,932 $(4,420)$22,820 $(160,817)$2,024,515 

 Three Months Ended March 31, 2020
 Available
for Sale
Assets		Deferred
Acquisition
Costs		Foreign
Exchange		Pension
Adjustments		Total
Balance at January 1, 2020
$1,982,650 $(5,916)$12,058 $(143,962)$1,844,830 
Other comprehensive income (loss) before reclassifications, net of tax(782,936)303 (21,679)0 (804,312)
Reclassifications, net of tax22,445 0 0 3,284 25,729 
Other comprehensive income (loss)(760,491)303 (21,679)3,284 (778,583)
Balance at March 31, 2020
$1,222,159 $(5,613)$(9,621)$(140,678)$1,066,247 


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GL Q1 2021 FORM 10-Q
  Three Months Ended September 30, 2017
  Available
for Sale
Assets		 Deferred
Acquisition
Costs		 Foreign
Exchange		 Pension
Adjustments		 Total
Balance at July 1, 2017 $1,090,055
 $(7,655) $10,902
 $(108,742) $984,560
Other comprehensive income (loss) before reclassifications, net of tax 55,160
 328
 5,547
 —
 61,035
Reclassifications, net of tax (8,314) —
 —
 2,021
 (6,293)
Other comprehensive income (loss) 46,846
 328
 5,547
 2,021
 54,742
Balance at September 30, 2017 $1,136,901
 $(7,327) $16,449
 $(106,721) $1,039,302
           
  Three Months Ended September 30, 2016
  Available
for Sale
Assets		 Deferred
Acquisition
Costs		 Foreign
Exchange		 Pension
Adjustments		 Total
Balance at July 1, 2016 $1,084,551
 $(8,658) $8,331
 $(95,067) $989,157
Other comprehensive income (loss) before reclassifications, net of tax 154,389
 405
 104
 —
 154,898
Reclassifications, net of tax (2,886) —
 —
 1,657
 (1,229)
Other comprehensive income (loss) 151,503
 405
 104
 1,657
 153,669
Balance at September 30, 2016 $1,236,054
 $(8,253) $8,435
 $(93,410) $1,142,826


8
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 3—Supplemental Information about Changes to Accumulated Other Comprehensive Income (continued)



Components of Accumulated Other Comprehensive Income
  Nine Months Ended September 30, 2017
  Available
for Sale
Assets		 Deferred
Acquisition
Costs		 Foreign
Exchange		 Pension
Adjustments		 Total
Balance at January 1, 2017 $692,314
 $(6,682) $4,967
 $(113,025) $577,574
Other comprehensive income (loss) before reclassifications, net of tax 453,455
 (645) 11,482
 241
 464,533
Reclassifications, net of tax (8,868) —
 —
 6,063
 (2,805)
Other comprehensive income (loss) 444,587
 (645) 11,482
 6,304
 461,728
Balance at September 30, 2017 $1,136,901
 $(7,327) $16,449
 $(106,721) $1,039,302
           
  Nine Months Ended September 30, 2016
  Available
for Sale
Assets		 Deferred
Acquisition
Costs		 Foreign
Exchange		 Pension
Adjustments		 Total
Balance at January 1, 2016 $332,333
 $(5,115) $3,627
 $(98,898) $231,947
Other comprehensive income (loss) before reclassifications, net of tax 911,069
 (3,138) 4,808
 513
 913,252
Reclassifications, net of tax (7,348) —
 —
 4,975
 (2,373)
Other comprehensive income (loss) 903,721
 (3,138) 4,808
 5,488
 910,879
Balance at September 30, 2016 $1,236,054
 $(8,253) $8,435
 $(93,410) $1,142,826
ReclassificationsReclassification adjustments: Reclassification adjustments out of Accumulated Other Comprehensive Income are presented below for the three and nine month periods ended September 30, 2017March 31, 2021 and 2016.2020.
Reclassification Adjustments
  Three Months Ended March 31,Affected line items in the Statement of Operations
Component Line Item20212020
Unrealized investment (gains) losses on available for sale assets:
Realized (gains) losses$(18,790)$26,920 Realized (gains) losses
Amortization of (discount) premium1,648 1,492 Net investment income
Total before tax(17,142)28,412 
Tax3,600 (5,967)Income taxes
Total after-tax(13,542)22,445 
Pension adjustments:
Amortization of prior service cost158 158 Other operating expense
Amortization of actuarial (gain) loss5,042 3,999 Other operating expense
Total before tax5,200 4,157 
Tax(1,091)(873)Income taxes
Total after-tax4,109 3,284 
Total reclassification (after-tax)
$(9,433)$25,729 

   Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,		 
Affected line items in the
Statement of Operations
  2017 2016 2017 2016 
Unrealized investment gains (losses) on available for sale assets:          
Realized (gains) losses $(12,910) $(3,513) $(13,264) $(7,809) Realized gains (losses)
Amortization of (discount) premium 119
 (927) (379) (3,495) Net investment income
Total before tax (12,791) (4,440) (13,643) (11,304)  
Tax 4,477
 1,554
 4,775
 3,956
 Income taxes
Total after tax (8,314) (2,886) (8,868) (7,348)  
Pension adjustments:          
Amortization of prior service cost 118
 120
 356
 360
 Other operating expenses
Amortization of actuarial gain (loss) 2,990
 2,431
 8,970
 7,294
 Other operating expenses
Total before tax 3,108
 2,551
 9,326
 7,654
  
Tax (1,087) (894) (3,263) (2,679) Income taxes
Total after tax 2,021
 1,657
 6,063
 4,975
  
Total reclassifications (after tax) $(6,293) $(1,229) $(2,805) $(2,373)  
9

GL Q1 2021 FORM 10-Q

9
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)



Note 4—Investments

Portfolio Composition:
A summarySummaries of fixed maturities available for sale by cost or amortized cost, and estimated fair value, and allowance for credit losses at September 30, 2017March 31, 2021 and December 31, 2020, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) are as follows. Redeemable preferred stock is as follows:included within the corporates by sector.
Portfolio Composition as of September 30, 2017
At March 31, 2021

Amortized
Cost		Allowance for Credit LossesGross
Unrealized
Gains		Gross
Unrealized
Losses
Fair
 Value(1)
% of Total
Fixed
Maturities(2)
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises$381,473 $0 $55,367 $(208)$436,632 2 
States, municipalities, and political subdivisions1,901,330 0 197,682 (7,653)2,091,359 11 
Foreign governments56,664 0 1,944 (4,407)54,201 0 
Corporates, by sector:
Financial4,458,076 0 719,494 (27,666)5,149,904 26 
Utilities1,976,871 0 425,135 (2,301)2,399,705 12 
Energy1,637,352 0 257,980 (9,816)1,885,516 9 
Other corporate sectors6,828,995 0 1,136,803 (24,753)7,941,045 39 
Total corporates14,901,294 0 2,539,412 (64,536)17,376,170 86 
Collateralized debt obligations36,810 0 24,491 0 61,301 0 
Other asset-backed securities134,388 0 4,482 (3,623)135,247 1 
Total fixed maturities
$17,411,959 $0 $2,823,378 $(80,427)$20,154,910 100 
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value(1)
 
% of Total
Fixed
Maturities(2)
Fixed maturities available for sale:         
U.S. Government direct, guaranteed, and government-sponsored enterprises$387,985
 $12,800
 $(1,098) $399,687
 2
States, municipalities, and political subdivisions1,160,537
 127,675
 (108) 1,288,104
 8
Foreign governments20,939
 1,607
 —
 22,546
 —
Corporates, by sector:         
Financial3,199,469
 426,345
 (25,880) 3,599,934
 22
Utilities1,948,519
 324,060
 (2,655) 2,269,924
 14
Energy1,602,054
 185,296
 (28,070) 1,759,280
 11
Other corporate sectors6,025,262
 666,120
 (22,670) 6,668,712
 40
Total corporates12,775,304
 1,601,821
 (79,275) 14,297,850
 87
Collateralized debt obligations59,204
 19,558
 (8,994) 69,768
 —
Other asset-backed securities145,224
 5,018
 (17) 150,225
 1
Redeemable preferred stocks, by sector:         
Financial336,822
 60,159
 (3,030) 393,951
 2
Utilities28,565
 2,333
 (116) 30,782
 —
Total redeemable preferred stocks365,387
 62,492
 (3,146) 424,733
 2
Total fixed maturities$14,914,580
 $1,830,971
 $(92,638) $16,652,913
 100
(1) AmountsAmount reported onin the balance sheet.
(2)At fair value.


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Table of Contents
Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in thousands, except per share data)

At December 31, 2020
Amortized
Cost		Allowance for Credit LossesGross
Unrealized
Gains		Gross
Unrealized
Losses
Fair
 Value(1)
% of Total
Fixed
Maturities(2)
Fixed maturities available for sale:
U.S. Government direct, guaranteed, and government-sponsored enterprises$380,602 $0 $87,272 $(43)$467,831 2 
States, municipalities, and political subdivisions1,880,607 0 251,291 (315)2,131,583 10 
Foreign governments52,913 0 2,635 (898)54,650 0 
Corporates, by sector:
Financial4,404,203 0 1,016,813 (24,221)5,396,795 26 
Utilities1,975,460 0 608,595 (108)2,583,947 12 
Energy1,623,970 (3,346)346,197 (3,083)1,963,738 9 
Other corporate sectors6,687,644 0 1,727,366 (6,218)8,408,792 40 
Total corporates14,691,277 (3,346)3,698,971 (33,630)18,353,272 87 
Collateralized debt obligations57,007 0 23,460 (8,869)71,598 0 
Other asset-backed securities134,739 0 3,614 (3,778)134,575 1 
Total fixed maturities
$17,197,145 $(3,346)$4,067,243 $(47,533)$21,213,509 100 
(1)Amount reported in the balance sheet.
(2)At fair value.

A schedule of fixed maturities available for sale by contractual maturity date at September 30, 2017March 31, 2021 is shown below on an amortized cost basis, net of allowance for credit losses and on a fair value basis. Actual maturitydisposition dates could differ from contractual maturities due to call or prepayment provisions.
At March 31, 2021
Amortized
Cost, net		Fair
Value
Fixed maturities available for sale:
Due in one year or less$105,545 $108,371 
Due after one year through five years772,951 855,320 
Due after five years through ten years1,886,155 2,215,335 
Due after ten years through twenty years6,391,788 7,768,248 
Due after twenty years8,084,093 9,010,840 
Mortgage-backed and asset-backed securities171,427 196,796 
$17,411,959 $20,154,910 


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GL Q1 2021 FORM 10-Q
 September 30, 2017
 Amortized
Cost		 Fair Value
Fixed maturities available for sale:   
Due in one year or less$140,702
 $143,863
Due after one year through five years660,487
 705,847
Due after five years through ten years1,430,894
 1,604,091
Due after ten years through twenty years4,397,807
 5,084,516
Due after twenty years8,079,191
 8,893,450
Mortgage-backed and asset-backed securities205,499
 221,146
 $14,914,580
 $16,652,913

10
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)
Analysis of Investment Operations: "Net investment income" for the three month periods ended March 31, 2021 and 2020 is summarized as follows:

Three Months Ended
March 31,
20212020% Change
Fixed maturities available for sale$221,719 $217,127 2 
Policy loans11,268 11,118 1 
Other long-term investments(1)
8,162 4,623 77 
Short-term investments4 307 (99)
241,153 233,175 3 
Less investment expense(5,333)(4,184)27 
Net investment income
$235,820 $228,991 3 
(1)For the three months ended March 31, 2021 and 2020, the investment funds, accounted for under the fair value option method, recorded $5.8 million and $2.0 million of distributions, respectively in net investment income.


Selected information about sales of fixed maturities available for sale is as follows.follows:
Three Months Ended
March 31,
20212020
Fixed maturities available for sale:
Proceeds from sales(1)
$61,858 $50,360 
Gross realized gains1,134 2,642 
Gross realized losses(12,019)0 
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Proceeds from sales$52,951
 $24,000
 $52,951
 $75,299
Gross realized gains4,851
 2,577
 4,851
 6,133
Gross realized losses—
 —
 —
 (214)
(1)There were no unsettled sales in the periods ended March 31, 2021 and 2020.


Fair Value Measurements:An analysis of "Realized gains (losses)" is as follows:
The following table represents
Three Months Ended
March 31,
20212020
Realized investment gains (losses):
Fixed maturities available for sale:
Sales and other(1)
$15,444 $4,934 
Provision for credit losses3,346 (31,854)
Fair value option—change in fair value9,885 583 
Other investments(523)240 
Realized gains (losses) from investments
28,152 (26,097)
Applicable tax(5,912)5,480 
Realized gains (losses), net of tax
$22,240 $(20,617)
(1)During the fair valuethree months ended March 31, 2021 and 2020, the Company recorded $85.8 million and $5.9 million of exchanges of fixed maturities available for sale measured on a recurring basis.(noncash transactions) that resulted in $25.2 million and $0, respectively in realized gains (losses).



12
GL Q1 2021 FORM 10-Q
Fair Value Measurements at September 30, 2017 using:
Description 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant Other Observable Inputs 
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total Fair
Value
Bonds:        
U.S. Government direct, guaranteed, and government-sponsored enterprises $—
 $399,687
 $—
 $399,687
States, municipalities, and political subdivisions 39,100
 1,249,004
 —
 1,288,104
Foreign governments —
 22,546
 —
 22,546
Corporates, by sector: 

 

 

 

Financial —
 3,537,728
 62,206
 3,599,934
Utilities —
 2,114,600
 155,324
 2,269,924
Energy —
 1,717,538
 41,742
 1,759,280
Other corporate sectors 3,225
 6,340,276
 325,211
 6,668,712
Total corporates 3,225
 13,710,142
 584,483
 14,297,850
Collateralized debt obligations —
 —
 69,768
 69,768
Other asset-backed securities —
 135,842
 14,383
 150,225
Redeemable preferred stocks, by sector: 

 

 

 

Financial —
 393,951
 —
 393,951
Utilities —
 30,782
 —
 30,782
Total redeemable preferred stocks —
 424,733
 —
 424,733
Total fixed maturities $42,325
 $15,941,954
 $668,634
 $16,652,913
Percent of total 0.3% 95.7% 4.0% 100.0%



11
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)Fair Value Measurements:The following tables represent the fair value of fixed maturities measured on a recurring basis at March 31, 2021 and December 31, 2020:
Fair Value Measurement at March 31, 2021 Using:
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)		Total Fair
Value
Fixed maturities available for sale
U.S. Government direct, guaranteed, and government-sponsored enterprises$0 $436,632 $0 $436,632 
States, municipalities, and political subdivisions0 2,091,359 0 2,091,359 
Foreign governments0 54,201 0 54,201 
Corporates, by sector:
Financial0 4,976,857 173,047 5,149,904 
Utilities0 2,226,600 173,105 2,399,705 
Energy0 1,848,502 37,014 1,885,516 
Other corporate sectors0 7,635,867 305,178 7,941,045 
Total corporates0 16,687,826 688,344 17,376,170 
Collateralized debt obligations0 0 61,301 61,301 
Other asset-backed securities0 123,638 11,609 135,247 
Total fixed maturities
$0 $19,393,656 $761,254 $20,154,910 
Percentage of total0 %96 %4 %100 %

Fair Value Measurement at December 31, 2020 Using:
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)		Significant Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)		Total Fair
Value
Fixed maturities available for sale
U.S. Government direct, guaranteed, and government-sponsored enterprises$0 $467,831 $0 $467,831 
States, municipalities, and political subdivisions0 2,131,583 0 2,131,583 
Foreign governments0 54,650 0 54,650 
Corporates, by sector:
Financial0 5,222,066 174,729 5,396,795 
Utilities0 2,400,602 183,345 2,583,947 
Energy0 1,925,549 38,189 1,963,738 
Other corporate sectors0 8,090,550 318,242 8,408,792 
Total corporates0 17,638,767 714,505 18,353,272 
Collateralized debt obligations0 0 71,598 71,598 
Other asset-backed securities0 121,705 12,870 134,575 
Total fixed maturities
$0 $20,414,536 $798,973 $21,213,509 
Percentage of total0 %96 %4 %100 %


13
GL Q1 2021 FORM 10-Q

Table of Contents
Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in thousands, except per share data)
The following table represents an analysis oftables represent changes in fixed maturities measured at fair value measurementson a recurring basis using significant unobservable inputs (Level 3).:
Analysis of Changes in Fair Value Measurements Using
Analysis of Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Asset-
backed Securities
Collateralized
Debt
Obligations		CorporatesTotal
Balance at January 1, 2021
$12,870 $71,598 $714,505 $798,973 
Included in realized gains / losses0 (6,787)0 (6,787)
Included in other comprehensive income(1,261)9,900 (24,135)(15,496)
Acquisitions0 0 0 0 
Sales0 (13,213)0 (13,213)
Amortization0 1,140 2 1,142 
Other(1)
0 (1,337)(2,028)(3,365)
Transfers into Level 3(2)
0 0 0 0 
Transfers out of Level 3(2)
0 0 0 0 
Balance at March 31, 2021
$11,609 $61,301 $688,344 $761,254 
Percent of total fixed maturities0 %1 %3 %4 %
Significant Unobservable Inputs (Level 3)
 Nine Months Ended September 30, 2017
 Asset-
Backed
Securities		 Collateralized
Debt
Obligations		 
Corporates(1)
 Total
Balance at January 1, 2017$—
 $63,503
 $559,600
 $623,103
Total gains or losses:       
Included in realized gains/losses—
 —
 —
 —
Included in other comprehensive income595
 7,787
 10,614
 18,996
Acquisitions14,000
 —
 21,666
 35,666
Sales—
 —
 —
 —
Amortization—
 3,705
 14
 3,719
Other(2)
(212) (5,227) (7,411) (12,850)
Transfers in and/or out of Level 3(3)
—
 —
 —
 —
Balance at September 30, 2017$14,383
 $69,768
 $584,483
 $668,634
Percent of total fixed maturities0.1% 0.4% 3.5% 4.0%
        
 Nine Months Ended September 30, 2016
 Asset-
Backed
Securities		 Collateralized
Debt
Obligations		 
Corporates(1)
 Total
Balance at January 1, 2016$—
 $70,382
 $530,806
 $601,188
Total gains or losses:       
Included in realized gains/losses—
 —
 788
 788
Included in other comprehensive income—
 (3,879) 33,365
 29,486
Acquisitions—
 —
 33,662
 33,662
Sales—
 —
 —
 —
Amortization—
 3,511
 14
 3,525
Other(2)
—
 (6,732) (10,882) (17,614)
Transfers in and/or out of Level 3(3)
—
 —
 —
 —
Balance at September 30, 2016$—
 $63,282
 $587,753
 $651,035
Percent of total fixed maturities—% 0.4% 3.7% 4.1%
(1) Includes redeemable preferred stocks.
(2) Includes capitalized interest, foreign exchange adjustments, and principal repayments.
(3) (2)Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.



Analysis of Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Asset-
backed Securities
Collateralized
Debt
Obligations		CorporatesTotal
Balance at January 1, 2020
$13,177 $74,104 $672,128 $759,409 
Included in realized gains / losses0 0 1,213 1,213 
Included in other comprehensive income(276)(5,475)(34,072)(39,823)
Acquisitions0 0 0 0 
Sales0 0 0 0 
Amortization0 1,139 2 1,141 
Other(1)
(134)(1,395)(20,876)(22,405)
Transfers into Level 3(2)
0 0 0 0 
Transfers out of Level 3(2)
0 0 0 0 
Balance at March 31, 2020
$12,767 $68,373 $618,395 $699,535 
Percent of total fixed maturities0 %1 %3 %4 %
(1)Includes capitalized interest, foreign exchange adjustments, and principal repayments. 
(2)Considered to be transferred at the end of the period. Transfers into Level 3 occur when observable inputs are no longer available. Transfers out of Level 3 occur when observable inputs become available.
12

14
GL Q1 2021 FORM 10-Q
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)
The following table presents changes in unrealized gains or (losses) for the period included in other comprehensive income for assets held at the end of the reporting period for Level 3s:


Other-Than-Temporary Impairments:
Changes in Unrealized Gains/Losses included in Other Comprehensive Income for Assets Held at the End of the Period
Asset-
backed Securities		Collateralized
Debt
Obligations		CorporatesTotal
At March 31, 2021$(1,261)$9,900 $(24,135)$(15,496)
At March 31, 2020(276)(5,475)(34,072)(39,823)

In accordance with the other-than-temporary impairment (OTTI) policy, the Company evaluated its
Unrealized Loss Analysis: The following table discloses information about fixed maturities available for sale in an unrealized loss positionposition.
Less than Twelve MonthsTwelve Months or LongerTotal
Number of issues (CUSIPs) held:
As of March 31, 2021271 23 294 
As of December 31, 202054 24 78 
Globe Life's entire fixed maturity portfolio consisted of 1,917 issues by 781 different issuers at March 31, 2021 and 1,900 issues by 777 different issuers at December 31, 2020. The weighted-average quality rating of all unrealized loss positions at amortized cost was A- and BBB- as of March 31, 2021 and December 31, 2020, respectively.


15
GL Q1 2021 FORM 10-Q
Table of Contents
Globe Life Inc.
Notes to determine if there was any impairmentCondensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in thousands, except per share data)
The following table discloses unrealized investment losses by class and major sector of fixed maturities available for the quarter. sale for which an allowance for credit losses has not been recorded at March 31, 2021.

Gross unrealized losses may fluctuate quarter over quarter due to adverse factors in the market that affect our holdings, such as changes in the interest rates or credit spreads. The Company considers many factors when determining whether an allowance for a credit loss should be recorded. While the Company holds securities that may be in an unrealized loss position from time to time, Torchmark has the ability and intent to hold these investments to recovery. Additionally, TorchmarkGlobe Life does not expectintend to sell and it is likely that management will not be required to sell any of its securitiesthe fixed maturities prior to their anticipated recovery due to the strong cash flows generated by its insurance operations.

Analysis of Gross Unrealized Investment Losses
For the nine months ended September 30, 2017, the Company recorded $245 thousand ($159 thousand, net of tax) in OTTI. For the comparable period in 2016, the Company concluded that there were no other-than-temporary impairments.
At March 31, 2021
Less than Twelve MonthsTwelve Months or LongerTotal
Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises$3,800 $(208)$3 $0 $3,803 $(208)
States, municipalities and political subdivisions211,681 (7,612)450 (41)212,131 (7,653)
Foreign governments32,807 (4,407)0 0 32,807 (4,407)
Corporates, by sector:
Financial296,250 (12,924)4,851 (386)301,101 (13,310)
Utilities28,739 (2,004)0 0 28,739 (2,004)
Energy159,994 (6,492)0 0 159,994 (6,492)
Other corporate sectors315,384 (18,826)0 0 315,384 (18,826)
Total corporates800,367 (40,246)4,851 (386)805,218 (40,632)
Collateralized debt obligations0 0 0 0 0 0 
Other asset-backed securities11,609 (1,324)0 0 11,609 (1,324)
Total investment grade securities1,060,264 (53,797)5,304 (427)1,065,568 (54,224)
Below investment grade securities:
States, municipalities and political subdivisions0 0 0 0 0 0 
Corporates, by sector:
Financial25,136 (125)104,183 (14,231)129,319 (14,356)
Utilities15,381 (297)0 0 15,381 (297)
Energy4,994 (2)54,866 (3,322)59,860 (3,324)
Other corporate sectors20,370 (3,789)19,287 (2,138)39,657 (5,927)
Total corporates65,881 (4,213)178,336 (19,691)244,217 (23,904)
Collateralized debt obligations0 0 0 0 0 0 
Other asset-backed securities0 0 11,576 (2,299)11,576 (2,299)
Total below investment grade securities65,881 (4,213)189,912 (21,990)255,793 (26,203)
Total fixed maturities
$1,126,145 $(58,010)$195,216 $(22,417)$1,321,361 $(80,427)

Unrealized Loss Analysis:

The following table discloses information about fixed maturities available for sale in an unrealized loss position.

  
Less than
Twelve
Months
 
Twelve
Months
or Longer
 Total
Number of issues (CUSIP numbers) held:      
As of September 30, 2017 151
 109
 260
As of December 31, 2016 407
 94
 501
16

GL Q1 2021 FORM 10-Q
Torchmark’s entire fixed maturity portfolio consisted of 1,514 issues at September 30, 2017 and 1,565 issues at December 31, 2016. The weighted average quality rating of all unrealized loss positions as of September 30, 2017 was BBB compared with BBB+ as of December 31, 2016.

13
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 4—Investments (continued)

The following table discloses unrealized investment losses by class and major sector of fixed maturities available for sale at September 30, 2017 for the period of time in a loss position. Torchmark considers these investments to be only temporarily impaired.December 31, 2020.

Analysis of Gross Unrealized Investment Losses
At September 30, 2017
At December 31, 2020
Less than Twelve MonthsTwelve Months or LongerTotal
Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss		Fair
Value		Unrealized
Loss
Fixed maturities available for sale:
Investment grade securities:
U.S. Government direct, guaranteed, and government-sponsored enterprises$2,006 $(43)$0 $0 $2,006 $(43)
States, municipalities and political subdivisions32,910 (315)0 0 32,910 (315)
Foreign governments19,532 (898)0 0 19,532 (898)
Corporates, by sector:
Financial117,762 (2,564)6,333 (2,168)124,095 (4,732)
Utilities2,726 (108)0 0 2,726 (108)
Energy1,692 (8)14,871 (106)16,563 (114)
Other corporate sectors21,882 (720)0 0 21,882 (720)
Total corporates144,062 (3,400)21,204 (2,274)165,266 (5,674)
Collateralized debt obligations0 0 0 0 0 0 
Other asset-backed securities28,864 (1,051)5 0 28,869 (1,051)
Total investment grade securities227,374 (5,707)21,209 (2,274)248,583 (7,981)
Below investment grade securities:
States, municipalities and political subdivisions0 0 0 0 0 0 
Corporates, by sector:
Financial6,822 (36)115,093 (19,453)121,915 (19,489)
Utilities0 0 0 0 0 0 
Energy18,432 (757)38,720 (2,212)57,152 (2,969)
Other corporate sectors25,711 (3,588)19,516 (1,910)45,227 (5,498)
Total corporates50,965 (4,381)173,329 (23,575)224,294 (27,956)
Collateralized debt obligations0 0 11,131 (8,869)11,131 (8,869)
Other asset-backed securities0 0 11,223 (2,727)11,223 (2,727)
Total below investment grade securities50,965 (4,381)195,683 (35,171)246,648 (39,552)
Total fixed maturities
$278,339 $(10,088)$216,892 $(37,445)$495,231 $(47,533)



17
GL Q1 2021 FORM 10-Q
  
Less than
Twelve Months
 
Twelve Months
or Longer
 Total
Description of Securities Fair Value 
Unrealized
Loss
 Fair Value 
Unrealized
Loss
 Fair Value 
Unrealized
Loss
Investment grade securities:            
Bonds:            
U.S. Government direct, guaranteed, and government-sponsored enterprises $97,370
 $(610) $5,422
 $(488) $102,792
 $(1,098)
States, municipalities and political subdivisions 10,115
 (70) 691
 (2) 10,806
 (72)

            
Corporates, by sector:            
Financial 94,944
 (1,024) 65,729
 (2,271) 160,673
 (3,295)
Utilities 101,687
 (1,643) 40,075
 (1,012) 141,762
 (2,655)
Energy 37,009
 (512) 93,841
 (6,555) 130,850
 (7,067)
Other corporate sectors 369,323
 (6,254) 247,324
 (11,047) 616,647
 (17,301)
Total corporates 602,963
 (9,433) 446,969
 (20,885) 1,049,932
 (30,318)
Other asset-backed securities 9,983
 (17) —
 —
 9,983
 (17)
Redeemable preferred stocks, by sector:            
Utilities 5,947
 (116) —
 —
 5,947
 (116)
Total redeemable preferred stocks 5,947
 (116) —
 —
 5,947
 (116)
Total investment grade securities 726,378
 (10,246) 453,082
 (21,375) 1,179,460
 (31,621)
Below investment grade securities:            
Bonds:            
States, municipalities and political subdivisions 269
 (36) —
 —
 269
 (36)
Corporates, by sector: 

 

 

 

    
Financial —
 —
 83,164
 (22,585) 83,164
 (22,585)
Energy —
 —
 78,721
 (21,003) 78,721
 (21,003)
Other corporate sectors —
 —
 45,330
 (5,369) 45,330
 (5,369)
Total corporates —
 —
 207,215
 (48,957) 207,215
 (48,957)
Collateralized debt obligations —
 —
 11,006
 (8,994) 11,006
 (8,994)
Redeemable preferred stocks, by sector:            
Financial —
 —
 24,080
 (3,030) 24,080
 (3,030)
Total redeemable preferred stocks —
 —
 24,080
 (3,030) 24,080
 (3,030)
Total below investment grade securities 269
 (36) 242,301
 (60,981) 242,570
 (61,017)
Total fixed maturities $726,647
 $(10,282) $695,383
 $(82,356) $1,422,030
 $(92,638)




14
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)


Note 5—Discontinued Operations

At December 31, 2015, Torchmark metFixed Maturities, Allowance for Credit Losses: A summary of the criteria to account for its Medicare Part D Prescription Drug Plan business as a discontinued operation. Historically, the business was a reportable segment. Effective July 1, 2016, Torchmark sold its Medicare Part D Prescription Drug Plan business to an unaffiliated third party.

The sale resulted in a net gain of $1.8 million ($1.2 million net of tax) in 2016. The operating results from discontinued operations are reflected in income for the nine months ended September 30, 2017. The remaining assets and liabilities reflected on the Torchmark balance sheet related to discontinued operations are receivables and payables associated with the 2016 and prior plan years that are expected to be settledactivity in the ordinary courseallowance for credit losses is as follows.
Three Months Ended
March 31,
20212020
Allowance for credit losses beginning balance
$3,346 $0 
Additions to allowance for which credit losses were not previously recorded0 31,854 
Additions (reductions) to allowance for fixed maturities that previously had an allowance0 0 
Reduction of allowance for which the Company intends to sell or more likely than not will be required to sell or sold during the period(3,346)0 
Allowance for credit losses ending balance
$0 $31,854 

As of business during 2017 and 2018.

The net assets related to discontinued operations at September 30, 2017March 31, 2021 and December 31, 2016 were2020, the Company did not have any fixed maturities in non-accrual status.

Other Long-Term Investments: Other long-term investments consist of the following assets:
March 31,
2021		December 31, 2020
Investment funds$459,707 $385,038 
Commercial mortgage loan participations158,693 160,602 
Other1,341 1,341 
Total
$619,741 $546,981 

The investment funds consist of limited partnerships whereby the Company has a pro-rata share of ownership ranging from 1% to 20%. For each investment, the Company has elected the fair value option, but would have been otherwise accounted for as follows:an equity method investment. The fair value option is assessed for each individual investment and concluded at the inception of the investment. Additionally, each investment is evaluated under ASC 810, Consolidation to determine if it is a variable interest entity and would qualify for consolidation; none of the investments qualify for consolidation as the Company is not the primary beneficiary in any of these investments.

 September 30,
2017		 December 31,
2016
Assets:   
Due premiums$3,945
 $8,840
Other receivables(1)
64,627
 118,692
Total assets related to discontinued operations68,572
 127,532

   
Liabilities:   
Risk sharing payable9,065
 8,374
Current and deferred income taxes payable1,630
 3,820
Other(2)
38,633
 15,230
Total liabilities related to discontinued operations49,328
 27,424

   
Net assets$19,244
 $100,108
(1) At September 30, 2017, other receivables included $65 millionThe investments are reported at the Company's pro-rata share of the investment fund's net asset value or its equivalent (NAV) as a practical expedient for fair value. Changes in the net asset value are recorded in "Realized gains (losses)" on the Condensed Consolidated Statements of Operations. Distributions received from the Centers for Medicarefunds arise from income generated by the underlying investments as well as the liquidation of the underlying investments. Periodic distributions are recorded in net investment income until cumulative distributions exceed our pro-rata share of operating earnings at which point the distributions will reduce the carrying value. Our maximum exposure to loss is equal to the outstanding carrying value and Medicaid Services (CMS). At Decemberfuture funding commitments.

During the quarter, the Company committed to one new limited partnership. The Company had $61 million of capital called during the quarter from existing investment funds, reducing our unfunded commitments. Our unfunded commitments were $377 million as of March 31, 2016, other receivables included $50 million from the Centers for Medicare and Medicaid Services (CMS) and $69 million from drug manufacturer rebates.2021.
(2) At September 30, 2017, the balance included $35.8 million due to CMS. At December 31, 2016, the balance included a $3.6 million contingent purchase price reserve.


15
18        
GL Q1 2021 FORM 10-Q
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

The following table presents additional information about the Company's investment funds as of March 31, 2021 and December 31, 2020 at fair value:
Fair ValueUnfunded Commitments
Investment CategoryMarch 31,
2021		December 31, 2020March 31,
2021		Redemption Term/Notice
Commercial mortgage loans$277,495 $227,050 $237,969 Portion non-redeemable and fully redeemable after 6 month period, subject to fund liquidity/discretion of General Partner. Expected life is 7 years for non-redeemable fund.
Opportunistic credit166,900 157,461 0 Initial 2 year lock on each new investment/semi-annual withdrawals thereafter/full redemption within 36 month period.
Other15,312 527 139,143 Not redeemable
Total investment funds$459,707 $385,038 $377,112 

Commercial Mortgage Loan Participations (commercial mortgage loans):Summaries of commercial mortgage loans by property type and geographical location at March 31, 2021 and December 31, 2020 are as follows:

March 31, 2021December 31, 2020
Carrying Value% of TotalCarrying Value% of Total
Property type:
Mixed use$49,614 31 $49,002 31 
Office36,138 23 36,153 22 
Hospitality22,841 15 22,605 14 
Retail19,562 12 19,319 12 
Industrial17,900 11 17,900 11 
Multi-family14,785 9 19,128 12 
Total recorded investment160,840 101 164,107 102 
Less allowance for credit losses(2,147)(1)(3,505)(2)
Carrying value, net of allowance for credit losses
$158,693 100 $160,602 100 

March 31, 2021December 31, 2020
Carrying Value% of TotalCarrying Value% of Total
Geographic location:
California$61,880 39 $61,610 38 
Virginia27,019 17 27,019 17 
New York16,573 10 16,602 10 
Pennsylvania11,589 7 11,314 7 
Indiana9,717 6 9,717 6 
Florida8,021 5 12,420 8 
Other26,041 17 25,425 16 
Total recorded investment160,840 101 164,107 102 
Less allowance for credit losses(2,147)(1)(3,505)(2)
Carrying value, net of allowance for credit losses
$158,693 100 $160,602 100 

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GL Q1 2021 FORM 10-Q
Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in thousands, except per share data)
The following tables are reflective of Management's internal risk ratings of the loan portfolio. Loans are rated low, moderate, and high. The risk categories consider many different factors such as quality of asset, borrower status, as well as macroeconomic factors including COVID-19. These loans, originated in 2017 to 2020, are transitional or under construction and may not yet be income producing. Certain ratios, such as loan to value and debt service coverage ratios, may not be evaluated as the value of the underlying transitional property significantly fluctuates based on completion of the project.

Net Book Value of Commercial Mortgage Loans Receivable by Year of Origination
As of March 31, 2021
Risk Rating:Number of Loans20212020201920182017Total
Low17 $0 $20,227 $15,332 $33,152 $61,881 $130,592 
Moderate4 0 0 10,686 8,021 0 18,707 
High2 0 0 4,561 6,980 0 11,541 
Total commercial mortgage loans23 $0 $20,227 $30,579 $48,153 $61,881 160,840 
Less allowance for credit losses on the investment pool(2,147)
Less allowance for credit losses on individual loans0 
Carrying value, net of valuation allowance
$158,693 

Net Book Value of Commercial Mortgage Loans Receivable by Year of Origination
As of December 31, 2020
Risk Rating:Number of Loans2020201920182017Total
Low17 $20,176 $14,757 $33,132 $61,460 $129,525 
Moderate4 0 10,640 7,796 0 18,436 
High3 0 4,554 11,592 0 16,146 
Total commercial mortgage loans24 $20,176 $29,951 $52,520 $61,460 164,107 
Less allowance for credit losses on the investment pool(2,503)
Less allowance for credit losses on individual loans(1,002)
Carrying value, net of valuation allowance
$160,602 
As of March 31, 2021, the Company evaluated the commercial mortgage loan portfolio on a pool basis to determine the allowance for credit losses. At the end of the period, the Company had 23 loans in the portfolio. For the three months ended March 31, 2021, the allowance for credit losses decreased by $1.4 million to $2.1 million. The provision for credit losses is included in "Realized gains (losses)".


Three Months Ended
March 31,
20212020
Allowance for credit losses beginning balance
$3,505 $0 
Cumulative effect of adoption ASU 2016-130 335 
Provision (reversal) for credit losses(1,358)0 
Loans charge-off0 0 
Allowance for credit losses ending balance
$2,147 $335 


20
GL Q1 2021 FORM 10-Q
Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in thousands, except per share data)
There were no delinquent commercial mortgage loans as of March 31, 2021, compared with one delinquent commercial mortgage at December 31, 2020. As of March 31, 2021 and December 31, 2020, the Company had one commercial mortgage loan in non-accrual status. The Company's unfunded commitment balance to commercial loan borrowers was $46 million.

Note 5—Discontinued Operations (continued)


Income from discontinued operations for the three and nine months ended September 30, 2017 and 2016 was as follows:
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Revenue:    
 
Health premium$(48) $53,632
 $(343) $165,105

    
 
Benefits and expenses:    
 
Health policyholder benefits(115) 33,331
 3,817
 146,683
Amortization of deferred acquisition costs—
 1,018
 —
 2,958
Commissions, premium taxes, and non-deferred acquisition expenses53
 3,352
 783
 12,253
Other operating expense32
 1,222
 809
 4,512
Total benefits and expenses(30) 38,923
 5,409
 166,406

    
 
Income (loss) before income taxes for discontinued operations(18) 14,709
 (5,752) (1,301)
Gain from sale of discontinued operations—
 613
 —
 613
Income tax benefit (expense)6
 (5,363) 2,013
 241
Income (loss) from discontinued operations$(12) $9,959
 $(3,739) $(447)

Operating cash flows of the discontinued operations for the nine months ended September 30, 2017 and 2016 were as follows:
 Nine Months Ended 
 September 30,
 2017 2016
Net cash provided from (used for) discontinued operations$77,125
 $82,565

Note 6—Commitments and Contingencies


Litigation:

Guarantees: The Parent Company has guaranteed letters of credit in connection with its credit facility with a group of banks. The letters of credit were issued by TMK Re, Ltd., a wholly-owned subsidiary, to secure TMK Re, Ltd.’s obligation for claims on certain policies reinsured by TMK Re, Ltd. that were sold by other Globe Life insurance subsidiaries. These letters of credit facilitate TMK Re, Ltd.’s ability to reinsure the business of Globe Life's insurance carriers. The agreement expires in 2023. The maximum amount of letters of credit available is $250 million. The Parent Company would be liable to the extent that TMK Re, Ltd. does not pay the reinsured party. As of March 31, 2021 and December 31, 2020, the outstanding balance was $135 million.

Litigation: Globe Life Inc. (formerly Torchmark Corporation) and its subsidiaries, in common with the insurance industry in general, are subject to litigation, involving various matters where we are eitherincluding putative class action litigation, alleged breaches of contract, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of agents of the defendant or the plaintiff. TorchmarkParent Company's insurance subsidiaries, are also currently the subjectemployment discrimination, and miscellaneous other causes of audits regarding the identification, reporting and escheatment of unclaimed property arising from life insurance policies and a limited number of annuity contracts. In each of these matters, basedaction. Based upon information presently available, and in light of legal and other factual defenses available to the Parent Company and its subsidiaries, management does not believe that it is reasonably possible that such litigation or audits will have a material adverse effect on Torchmark’sGlobe Life's financial condition, future operating results or liquidity.liquidity; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future. This bespeaks caution, particularly in states with reputations for high punitive damage verdicts. Globe Life's management recognizes that large punitive damage awards bearing little or no relation to actual damages continue to be awarded by juries in jurisdictions in which the Company has substantial business, creating the potential for unpredictable material adverse judgments in any given punitive damage suit.


As previously reported,On September 12, 2018, putative class action litigation was filed against American Income in California’s Contra Costa County Superior Court (Joh v. American Income Life Insurance Company, Case No. C18-01863) (Joh Action). An amended complaint was filed on October 18, 2018. American Income removed the case to the United States District Court for the Northern District of California (Case No. 3:18-cv-06364-TSH). A second amended complaint was filed on May 20, 2019. The plaintiffs, former insurance sales agents of American Income, sued on behalf of all current and former trainees and sales agents who sold insurance for American Income in the State of California for the four years prior to the filing of the complaint. The second amended complaint alleged that such individuals were employees and asserted claims under the California Labor Code, California Business and Professions Code, and California Private Attorney General Act. The complaint sought compensatory damages, penalties and attorney fees on claims for failure to pay wages/commissions, failure to appropriately pay agents at termination, failure to provide itemized wage statements, failure to reimburse expenses, misclassification and unfair business practices.

On October 18, 2018, putative class action litigation was filed against Torchmark Corporation and American Income in California’s Los Angeles County Superior Court (Golz v. American Income Life Insurance Company, et al., Case No. 18STCV01354) (Golz Action). American Income removed the case to the United States District Court for the Central District of California (Case No. 2:18-cv-09879 R (SSx)). An amended complaint was filed on February 10, 2015 against5, 2019. On February 6, 2019, Torchmark subsidiary, Globe Life And Accident Insurance Company (Globe) in Oklahoma County, OklahomaCorporation was dismissed without prejudice and the case proceeded with respect to American Income. On April 2, 2019, the District Court (Proctor v. Globe Life And Accident Insurance Company, Case No. CJ-2015-838) asserting claims for breachgranted American Income’s motion to dismiss four of the implied covenantsfive causes of good faith and fair dealing and for false representation, deceit and conversion in connection with Globe’s denial of plaintiff’saction asserted. The amended complaint’s remaining claim on a life insurance policy for non-payment of premium. Plaintiff, who had alleged that Globe had improperly retained 12 monthly premium payments onplaintiff, as an American Income insurance agent trainee in California, was an employee who should have been compensated accordingly. The plaintiff sought to represent a policy thatclass of individuals in California who trained to contract as American Income agents and who subsequently worked as contracted agents. The class period was treatedalleged to begin four years prior to the complaint’s filing. The complaint sought restitution under the California Business and Professions Code for alleged unfair business practices such as lapsed or not returnedfailure to in-force status, seeks actualpay minimum wage and punitive damages, prejudgment interest, attorney fees, costsovertime, failure to provide meal and other relief. Plaintiff subsequently amended hisrest breaks, and failure to reimburse business expenses.


16

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Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 6—CommitmentsOn December 14, 2018, putative class action litigation was filed against American Income in United States District Court for the Northern District of California (Hamilton v. American Income Life Insurance Company, Case No. 4:18-cv-7535-KAW) (Hamilton Action). An amended complaint was filed on January 23, 2019. The plaintiffs, former insurance sales agents of American Income, sued on behalf of all current and Contingencies (continued)former trainees and sales agents who sold insurance for American Income in the State of California for the last four years prior to the filing of the complaint. The lawsuit alleged that putative class members were employees and asserted claims under the California Labor Code, California Business and Professions Code, and California Private Attorney General Act. The complaint sought compensatory damages, penalties and attorney fees on claims for failure to pay minimum wage and overtime, failure to provide meal and rest breaks, failure to appropriately pay agents at termination, failure to provide itemized wage statements, failure to reimburse expenses, misclassification and unfair business practices.



With respect to the related cases above, on August 6, 2020, the plaintiffs in the Joh and Hamilton Actions jointly moved for preliminary approval of a settlement of all class and representative claims, which broadly covers “all individuals who trained to become and/or worked as sales agents in California for Defendant during the last four years prior to the filing of the original Complaint in Joh and whose training and/or work began before August 16, 2019.” Plaintiffs’ preliminary motion anticipated that the proposed settlement would resolve all claims in the Joh and Hamilton Actions, and in doing so, encompass pending claims asserted in the Golz Action for the settlement period. On August 21, 2020, the Northern District of California granted the Motion for Preliminary Approval of Class Action Settlement and scheduled a hearing for final approval of the settlement. On January 7, 2021, plaintiff’s motion for final settlement approval was granted and a final judgment was entered on the same day, thereby resolving the Joh Action. The Hamilton Action was subsequently dismissed with prejudice on March 17, 2021. On April 1, 2021, the Golz Action was dismissed with prejudice as to plaintiff’s individual claims and without prejudice as to the claims of putative class members.

On August 5, 2020, putative class and collective action litigation was filed against American Income and National Income Life Insurance Company (“National Income”) in United States District Court for the Central District of California (Natalie Bell, Gisele Mobley, Ashly Rai, and John Turner v. American Income Life Insurance Company and National Income Life Insurance Company, Case No. 2:20-cv-07046). On December 18, 2020, the plaintiffs voluntarily dismissed Mr. Turner’s claims and all claims against defendant National Income. Following the dismissal, the complaint to add allegationsalleges that insurance agent trainees should have been classified as employees, and after contracting should have been classified as employees instead of conversionindependent contractors. Plaintiff Bell is a former California trainee and civil theftplaintiff Rai is a former California agent. They assert claims under California law on behalf of a purportedputative California class of Globe’s U.S. policyholders who had paid premiums retained by Globe when their policies were lapsedfor the four years prior to February 13, 2020 through case conclusion. They make claims under (a) the California Labor Code for alleged meal and not reinstatedrest break violations, overtime, minimum wage, alleged failure to pay wages at the time of termination, expense reimbursement, and alleged failure to provide accurate wage statements; and (b) the premium payments. Globe removedCalifornia Business and Professions Code for alleged unfair business practices. They also seek liquidated damages, penalties and attorney’s fees under California law. Plaintiff Mobley is a former Florida agent who asserts a claim under Florida law on behalf of a putative Florida class for the five years prior to February 13, 2020 through case conclusion. She makes a claim under the Florida General Labor Regulations, including the Florida Minimum Wage Act, for alleged failure to pay all wages owed. The plaintiffs also assert a national collective action on behalf of all “similarly situated” individuals for minimum wage, overtime, liquidated damages, penalties, an accounting and attorney’s fees and costs under the Fair Labor Standards Act for the three years prior to February 13, 2020 through case conclusion. American Income responded to the U.S.complaint with a motion to compel the named plaintiffs to arbitrate their individual claims and other procedural challenges. On April 6, 2021, the court granted American Income’s motion to compel arbitration as to plaintiffs Mobley and Rai, and denied the motion without prejudice as to plaintiff Bell. American Income anticipates renewing its motion to compel arbitration as to Bell.

On January 4, 2021, Mr. Turner refiled his class and Fair Labor Standards Act (FLSA) claims in the United States District Court for the WesternNorthern District of Oklahoma (CaseNew York. (John Turner v. National Income Life Insurance Company, Case No. 15-CV-0070-M)5:21-cv-0003). Plaintiff Turner is a former New York National Income agent who asserts a claim under New York law on July 10, 2015 and filed a Motion to Dismiss on July 17, 2015. The Court denied plaintiff’s Motion to Remand back to state court on October 26, 2015, but allowed the plaintiff to amend the complaint to assertbehalf of a putative New York class actionof trainees and sales agents for the six years prior to February 13, 2020 through case conclusion. He makes a claim under the New York Labor Law for alleged failure to pay minimum wage and overtime, and for expense reimbursement. In addition, Mr. Turner asserts a claim under the FLSA on behalf of

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GL Q1 2021 FORM 10-Q
Table of Contents
Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in federal court. Plaintiff filedthousands, except per share data)
trainees and sales agents for the three years prior to February 13, 2020 through case conclusion. The FLSA claim alleges failure to pay for all hours worked and seeks expense reimbursement. The lawsuit also requests declaratory relief and liquidated damages. National Income anticipates filing a Motion for Class Certification on September 23, 2016. Globe filed a Response in Opposition on November 4, 2016. The Court denied plaintiff’s Motion for Class Certification on August 18, 2017.motion to compel arbitration of Mr. Turner’s individual claims.


With respect to currentthe aforementioned litigation, at this time, management believes that the possibility of a material judgment adverse to Torchmark is remote, and no estimate of range can be made for loss contingencies that are at least reasonably possible but not accrued.

Guaranty Fund Assessment:

In 2017, the Commonwealth Court of Pennsylvania issued orders placing Penn Treaty Network America Insurance Company (Penn Treaty) and affiliate American Network Insurance Company (ANIC) in liquidation due to financial difficulties. In such instances, the various state guaranty fund associations employ funding mechanisms, through assessments to their member companies, to cover the obligations of the insolvent entities. Consequently, the Company continues to receive guaranty fund assessments from the state associations related to these companies. The Company has projected its share of the ultimate assessments from these insolvencies based on assumptions about future events and its market share of premiums by state. The total estimated assessment for Torchmark's subsidiaries is approximately $10 million of which $1.4 million is estimated to be unrecoverable. We are anticipating the remaining amount of the assessments to be recovered through premium tax credits.remote.


Note 7—6—Liability for Unpaid Claims


Activity in the liability for unpaid health claims is summarized as follows:
March 31,
2021		December 31,
2020
Balance at beginning of period
$162,261 $163,808 
Incurred related to:
Current year163,839 584,936 
Prior year(9,861)(14,829)
Total incurred153,978 570,107 
Paid related to:
Current year66,431 442,127 
Prior year86,088 129,527 
Total paid152,519 571,654 
Balance at end of period
$163,720 $162,261 

 Nine Months Ended 
 September 30,
 2017 2016
Balance at beginning of period$143,128
 $137,120
Incurred related to:
 
Current year393,747
 388,998
Prior years(10,745) (5,710)
Total incurred383,002
 383,288
Paid related to:
 
Current year279,563
 275,388
Prior years103,010
 102,435
Total paid382,573
 377,823
Balance at end of period$143,557
 $142,585
Below is the reconciliation of the liability for of "Policy claims and other benefits payable" in the Condensed Consolidated Balance Sheets.

March 31,
2021		December 31,
2020
Policy claims and other benefits payable:
Life insurance$234,470 $237,246 
Health insurance163,720 162,261 
Total$398,190 $399,507 

17

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GL Q1 2021 FORM 10-Q
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 7—Liability for Unpaid Claims (continued)Postretirement Benefits




 September 30,
2017		 December 31, 2016
Policy claims and other benefits payable:
 
Short-duration contracts$23,193
 $26,721
Insurance lines other than short duration—health120,364
 116,407
Insurance lines other than short duration—life175,275
 156,437
Total policy claims and other benefits payable$318,832
 $299,565


Short-Duration Contracts

Although Torchmark primarily sells long-duration contracts for both lifeGlobe Life has qualified noncontributory defined benefit pension plans (Pension Plans) and health, the Companycontributory savings plans that cover substantially all employees. There is also hasa nonqualified noncontributory supplemental executive retirement plan (SERP) that covers a limited amountnumber of group health productsofficers. The tables included herein will focus on the defined benefit plans and SERP.

Pension Assets: The following table presents the assets of the Company's defined benefit pension plan at March 31, 2021 and December 31, 2020.
Pension Assets by Component at March 31, 2021
 Fair Value Determined by:  
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Total
Amount
% to
Total
Corporate bonds:
Financial$0 $54,420 $0 $54,420 10 
Utilities0 42,598 0 42,598 8 
Energy0 22,015 0 22,015 4 
Other corporates0 90,605 0 90,605 17 
Total corporate bonds0 209,638 0 209,638 39 
Exchange traded fund(1)
259,872 0 0 259,872 49 
Other bonds0 244 0 244 0 
Guaranteed annuity contract(2)
0 30,253 0 30,253 6 
Short-term investments6,651 0 0 6,651 1 
Other8,419 0 0 8,419 2 
$274,942 $240,135 $0 515,077 97 
Other long-term investments(3)
15,608 3 
Total pension assets
$530,685 100 
(1)A fund including marketable securities that qualifymirror the S&P 500 index.
(2)Representing a guaranteed annuity contract issued by Globe Life Inc.'s subsidiary, American Income Life Insurance Company, to fund the obligations of the American Income Life Insurance Company Non-Exempt Employees Defined Benefit Pension Plan ("American Income Pension Plan").
(3)Included in other long-term investments is an investment fund that reports the Pension Plan's pro-rata share of the limited partnership's net asset value per share or its equivalent (NAV), as short-duration contracts in accordance witha practical expedient for fair value. The Pension Plan owns less than 1% of the applicable guidance.investment fund. As of March 31, 2021, the expected term of the investment fund is approximately 4 years and the commitment of the investment is fully funded. The investment is non-redeemable.

The below table illustrates the total incurred but not reported liabilities plus expected development on reported claims for short-duration products over the last five years. Claim frequency is determined by duration and incurred date.

 As of September 30, 2017
Accident YearTotal of incurred-but-not-reported liabilities plus expected development on reported claims
2013$—
20141
201546
20161,022
201722,124
Total$23,193
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18
Table of Contents
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)


Note 8—Postretirement Benefit Plans
The following tables present a summary of post-retirement benefit costs by component.
Components of Post-Retirement Benefit Costs
 Three Months Ended September 30,
 Pension Benefits Other Benefits
 2017 2016 2017 2016
Service cost$4,486
 $3,894
 $—
 $—
Interest cost5,552
 5,430
 249
 212
Expected return on assets(5,900) (5,782) —
 —
Amortization:       
Prior service cost118
 120
 —
 —
Actuarial (gain) loss2,952
 2,423
 38
 8
Direct recognition of expense—
 —
 111
 45
Net periodic benefit cost$7,208
 $6,085
 $398
 $265
        
 Nine Months Ended September 30,
 Pension Benefits Other Benefits
 2017 2016 2017 2016
Service cost$13,457
 $11,682
 $—
 $—
Interest cost16,653
 16,294
 749
 636
Expected return on assets(17,697) (17,346) —
 —
Amortization:       
Prior service cost356
 360
 —
 —
Actuarial (gain)/loss8,855
 7,270
 115
 24
Direct recognition of expense—
 —
 323
 99
Net periodic benefit cost$21,624
 $18,260
 $1,187
 $759
The following table presents assets at fair value for the defined-benefit pension plans at September 30, 2017 and December 31, 2016.
Pension Assets by Component at December 31, 2020
 Fair Value Determined by:  
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant
Observable
Inputs (Level 2)
Significant
Unobservable
Inputs (Level 3)
Total
Amount
% to
Total
Corporate bonds:
Financial$0 $52,252 $0 $52,252 10 
Utilities0 45,888 — 45,888 9 
Energy0 22,480 0 22,480 4 
Other corporates0 88,983 0 88,983 17 
Total corporate bonds0 209,603 0 209,603 40 
Exchange traded fund(1)
245,170 0 0 245,170 46 
Other bonds0 258 0 258 0 
Guaranteed annuity contract(2)
0 30,119 0 30,119 6 
Short-term investments20,960 0 0 20,960 4 
Other7,109 0 0 7,109 1 
$273,239 $239,980 $0 513,219 97 
Other long-term investments(3)
16,313 3 
Total pension assets
$529,532 100 
(1)A fund including marketable securities that mirror the S&P 500 index.
(2)Representing a guaranteed annuity contract issued by Globe Life Inc.'s subsidiary, American Income Life Insurance Company, to fund the obligations of the American Income Pension Plan.
(3)Included in other long-term investments is an investment fund that reports the Pension Plan's pro-rata share of the limited partnership's net asset value per share or its equivalent (NAV), as a practical expedient for fair value. The Pension Plan owns approximately 1% of the investment fund. As of December 31, 2020, the expected term of the investment fund is approximately 4 years and the commitment of the investment is fully funded. The investment is non-redeemable.


SERP: The following table includes information regarding the SERP.
Three Months Ended
March 31,
20212020
Premiums paid for insurance coverage$443 $443 
March 31,
2021		December 31,
2020
Total investments:
Company owned life insurance$52,138 $51,361 
Exchange traded funds74,711 75,390 
$126,849 $126,751 



 September 30, 2017 December 31, 2016
 Amount % Amount %
Corporate bonds$172,587
 47 $160,036
 49
Exchange traded fund(1)
153,824
 42 134,771
 41
Other bonds259
 — 258
 —
Guaranteed annuity contract(2)
21,163
 6 18,997
 6
Short-term investments12,676
 4 7,391
 2
Other5,118
 1 7,418
 2
Total$365,627
 100 $328,871
 100
(1)A fund including marketable securities that mirror the S&P 500 index.
(2)Representing a guaranteed annuity contract issued by Torchmark's subsidiary, American Income Life Insurance Company, to fund the obligations of the American Income Pension Plan.

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19
TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 8—Postretirement Benefits (continued)

Pension and SERP Liabilities: The following table presents liabilities for the defined-benefitdefined benefit pension plans and SERP at September 30, 2017March 31, 2021 and December 31, 2016.2020.
Pension Liability
March 31,
2021		December 31,
2020
Defined benefit pension$673,114 $667,753 
SERP95,631 95,560 
Pension benefit obligation$768,745 $763,313 

 September 30,
2017		 December 31, 2016
Funded defined benefit pension$475,927
 $449,613
SERP(1) (Active)
77,223
 74,687
SERP(1) (Closed)
2,827
 3,222
Pension Benefit Obligation$555,977
 $527,522
(1)Supplemental executive retirement plan (SERP).
DuringNet Periodic Benefit Cost: The following table presents the ninenet periodic benefit costs for the defined benefit pension plans and SERP by expense components for the three months ended September 30, 2017, the Company made $19 million in cash contributions to the qualified pension plans. Torchmark will not make any additional cash contributions in 2017.March 31, 2021 and 2020.
With respect to the Company’s active nonqualified noncontributory SERP, life insurance policies on the lives
Components of plan participants have been established with an unaffiliated carrier to provide for a portion of the Company’s obligations under the plan. These policies along with investments deposited with an unaffiliated trustee were previously placed in a Rabbi Trust to provide for the payment of the plan obligations. At September 30, 2017, the combined value of the insurance policies and investments in the Rabbi Trust to support plan liabilities were $94 million, compared with $86 million at December 31, 2016. Since this plan is nonqualified and therefore is treated as unfunded, the values of the insurance policies and investments are recorded as Other assets in the Condensed Consolidated Balance Sheets and are not included in the chart of plan assets above.Net Periodic Benefit Cost
Three Months Ended
March 31,
 20212020
Service cost$7,918 $6,116 
Interest cost5,467 5,651 
Expected return on assets(8,083)(7,390)
Amortization:
Prior service cost158 158 
Actuarial (gain) loss4,985 3,924 
Net periodic benefit cost
$10,445 $8,459 

Note 9—8—Earnings Per Share

Earnings per Share: A reconciliation of basic and diluted weighted-average shares outstanding used in the computation of basic and diluted earnings per share is as follows:
Three Months Ended
March 31,
20212020
Basic weighted average shares outstanding103,482,944 107,285,223 
Weighted average dilutive options outstanding1,354,773 1,847,021 
Diluted weighted average shares outstanding104,837,717 109,132,244 
Antidilutive shares1,836,559 529,129 

Antidilutive shares are excluded from the calculation of diluted earnings per share. 

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Globe Life Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Dollar amounts in thousands, except per share data)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Basic weighted average shares outstanding115,921,134
 119,480,642
 116,772,652
 120,476,813
Weighted average dilutive options outstanding2,521,815
 2,430,121
 2,540,955
 2,209,739
Diluted weighted average shares outstanding118,442,949
 121,910,763
 119,313,607
 122,686,552
Antidilutive shares—
 —
 1,174,469
 —


Note 10—9—Business Segments
Torchmark's
Globe Life is organized into 4 segments: life insurance, supplemental health insurance, annuities, and investments. In addition, other expenses not included in these segments are reported in "Corporate & Other."

Globe Life's reportable insurance segments are based on the insurance product lines it markets and administers: life insurance, supplemental health insurance, and annuities. These major product lines are set out as reportable segments because of the common characteristics of products within these categories, comparability of margins, and the similarity in regulatory environment and management techniques. Torchmark'sThere is also an investment segment which manages the investment portfolio, debt, and cash flow for the insurance segments and the corporate function. The Company's chief operating decision makers evaluate the overall performance of the operations of the Company in accordance with these segments.
Management’s measure of profitability for each insurance segment is insurance underwriting margin, which is underwriting income before other income and insurance administrative expenses. It represents the profit margin on
Life insurance products before administrative expenses,marketed by Globe Life include traditional whole life and is calculated by deducting net policy obligations (claims incurredterm life insurance. Health insurance products are generally guaranteed-renewable and change in reserves), commissionsinclude Medicare Supplement, critical illness, accident, and other acquisition expenses from premium revenue. Torchmark further views the profitabilitylimited-benefit supplemental hospital and surgical coverage. Annuities include fixed-benefit contracts.
Globe Life markets its insurance products through a number of distribution channels, each insurance product segment by the marketing groups that distributeof which sells the products of that segment: direct response,one or more of Globe Life's insurance segments. Our distribution channels consist of the following exclusive agencies: American Income Life Division (American Income), Liberty National Division (Liberty National) and Family Heritage Division (Family Heritage); an independent agencies, or captive agencies.agency, United American Division (United American); and our Direct to Consumer Division (Direct to Consumer). The tables below present segment premium revenue by each of Globe Life's distribution channels.


Premium Income by Distribution Channel

Three Months Ended March 31, 2021
 LifeHealthAnnuityTotal
Distribution ChannelAmount% of
Total		Amount% of
Total		Amount% of
Total		Amount% of
Total
American Income$334,895 47 $27,351 9 $0 0 $362,246 36 
Direct to Consumer244,028 35 19,360 7 0 0 263,388 26 
Liberty National75,737 11 47,040 16 0 0 122,777 12 
United American2,277 0 117,087 40 1 100 119,365 12 
Family Heritage1,118 0 83,335 28 0 0 84,453 9 
Other50,064 7 0 0 0 0 50,064 5 
$708,119 100 $294,173 100 $1 100 $1,002,293 100 

 Three Months Ended March 31, 2020
 LifeHealthAnnuityTotal
Distribution ChannelAmount
% of
Total
Amount
% of
Total
Amount
% of
Total
Amount
% of
Total
American Income$302,852 47 $25,727 9 $0 0 $328,579 35 
Direct to Consumer220,043 34 19,796 7 0 0 239,839 26 
Liberty National72,868 11 47,640 17 0 0 120,508 13 
United American2,490 0 110,059 39 0 0 112,549 12 
Family Heritage1,021 0 76,983 28 0 0 78,004 8 
Other50,356 8 0 0 0 0 50,356 6 
$649,630 100 $280,205 100 $0 0 $929,835 100 
20

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TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 10—Business Segments (continued)

Torchmark’s management prefers to evaluate the performance of its underwriting and investment activities separately, rather than allocating investment incomeDue to the underwriting results. As such, the investment function is presented as a stand-alone segment. The investment segment includes the managementnature of the investment portfolio, debt, and cash flow. Management’slife insurance industry, Globe Life has no individual or group that would be considered a major customer. Substantially all of Globe Life's business is conducted in the United States.
The measure of profitability established by the chief operating decision makers for this segmentthe insurance segments is excess investmentunderwriting margin before other income which isand administrative expenses, in accordance with the income earnedmanner the segments are managed. It essentially represents gross profit margin on the investment portfolioinsurance products before insurance administrative expenses and consists primarily of premium less the required interest on net policy liabilitiesbenefits, acquisition expenses, and financing costs. Financing costs include the interest on Torchmark’s debt. Other income and insurance administrative expense are classified in a separate Other segment.
The majority of the Company’s requiredcommissions. Required interest on net policy liabilities (benefit reserves less the deferred acquisition cost asset)costs) is not credited to policyholder accounts. Instead, it is an actuarial assumption for discounting cash flowsreflected as a component of the Investment segment (rather than as a component of underwriting margin in the computation of benefit reservesinsurance and annuity segments) in order to match this cost with the amortization ofinvestment income earned on the deferred acquisition cost asset. Investment income required to fundassets supporting the required interest on net policy liabilitiesliabilities.
The measure of profitability for the Investment segment is removed fromexcess investment income, representing the income earned on the investment segment and applied to the insurance segments to eliminate the effectportfolio in excess of the required interest from the insurance segments. As a result, the investment segment measures net investment income against the required interest on net policy liabilitiesrequirements and financing costs whileassociated with Globe Life's debt. Other than the insurance segments simply measure premiums against net policy benefitsabove-mentioned interest allocations, no other intersegment revenues or expenses are recognized. Expenses directly attributable to corporate operations are included in the “Corporate & Other” category. Stock-based compensation expense is considered a corporate expense by Globe Life management and expenses. Management believesis included in this presentation facilitates a more meaningful analysis of the Company’s underwriting and investment performance as the underwriting results are based on premiums, claims,category. All other unallocated revenues and expenses andon a pretax basis, including insurance administrative expense, are not affected by unanticipated fluctuationsalso included in investment yields.the “Corporate & Other” segment category.
 
As noted, Torchmark’s “core operations” are insurance andGlobe Life holds a sizable investment management. The insurance segments issue policies for which premiums are collected for the eventual payment of policy benefits. In addition to policy benefits, operating expenses are incurred including acquisition costs, administrative expenses, and taxes. Because life and health contracts can be long term, premium receipts in excess of current expenses are invested. Investment activities, conducted by the investment segment, focus on seeking quality investments with a yield and term appropriateportfolio to support its insurance liabilities, the insurance product obligations. These investments generally consist of fixed maturities,yield from which is used to offset policy benefit, acquisition, administrative and over the long term, the expected yields aretax expenses. This yield or investment income is taken into account when setting insuranceestablishing premium rates and product profitability expectations. As a result, fixed maturities are generally held for long periods to support the liabilities, and Torchmark generally expects to hold investments until maturity. However, dispositionsexpectations of investments occur fromits insurance products. From time to time, investments are sold or called, or experience a credit loss event, each of which are reflected by the Company as realized gain (loss)—investments. These gains or losses generally for reasons suchoccur as credit concerns,a result of disposition due to issuer calls, by issuers,compliance with Company investment policies, or other factors.

Since Torchmark does not actively trade investments,reasons often beyond management’s control. Unlike investment income, realized gains and losses from the disposition and write down of investments are generally incidental to insurance operations, and only overall yields are not considered a material factor inwhen setting premium rates or insurance pricing or product profitability.profitability expectations. While from time to time these realized gains and losses could be significantare not relevant to net income in the period in whichsegment profitability or core operating results, they occur, they generallycan have a limited effectmaterial positive or negative result on the yield of the total investment portfolio. Further, because the proceeds of the disposals are reinvested in the portfolio, the disposals have little effect on the size of the portfolio and the income from the reinvestments is included in net investment income. Therefore,For these reasons, management removes realized investment gains and losses from results of core operationswhen it views its segment operations.

Management removes items that are related to prior periods when evaluating the performanceoperating results of current periods. Management also removes non-operating items unrelated to its core insurance activities when evaluating those results. Therefore, these items are excluded in its presentation of segment results, because accounting guidance requires that operating segment results be presented as management views its business. With the exception of the Company. For this reason,administrative settlements noted in the paragraphs above, all of these gains and lossesitems are excluded from Torchmark’sincluded in “Other operating segments.
Torchmark accounts for its stock options and restricted stock under current accounting guidance requiring stock options and stock grants to be expensed based on fair value atexpense” in the timeCondensed Consolidated Statements of grant. Management considers stock compensation expense to be an expense of the Parent Company. Therefore, stock compensation expense is treated as a corporate expense in Torchmark’s segment analysis.
As discussed in Note 6—Commitments and ContingenciesOperations, the Company received an assessment from various state guaranty fund associations for the liquidation of Penn Treaty and its affiliate. The total estimated assessment for Torchmark's subsidiaries is approximately$10 million of which$1.4 million is estimated to be unrecoverable. We are anticipatingappropriate year. See additional detail below in the remaining amount of the assessments to be recovered through premium tax credits. The assessment expenses were considered a non-operational event and therefore were excluded from the core underwriting operations of the Company. tables.


21

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TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 10—Business Segments (continued)

The following tables set forth a reconciliation of Torchmark’sGlobe Life's revenues and operations by segment to its major income statement line items. See Note—1 Significant Accounting Policies for additional information concerning reconciling items of segment profits to pretax income and each significant line item in its Condensed Consolidated Statements of Operations.income.
Reconciliation of Segment Operating Information to the Condensed Consolidated Statement of Operations
Three Months Ended March 31, 2021
LifeHealthAnnuityInvestmentCorporate & OtherAdjustmentsConsolidated
Revenue:
Premium$708,119 $294,173 $1 $0 $0 $0 $1,002,293 
Net investment income0 0 0 235,820 0 0 235,820 
Other income0 0 0 0 295 0 295 
Total revenue708,119 294,173 1 235,820 295 0 1,238,408 
Expenses:
Policy benefits517,631 187,829 7,259 0 0 0 712,719 
Required interest on reserves(179,925)(24,995)(10,005)214,925 0 0 0 
Required interest on DAC53,795 6,962 70 (60,827)0 0 0 
Amortization of acquisition costs123,304 29,207 482 0 0 0 152,993 
Commissions, premium taxes, and non-deferred acquisition costs56,668 22,990 8 0 0 0 79,666 
Insurance administrative expense(1)
0 0 0 0 66,176 4,828 (2)71,004 
Parent expense0 0 0 0 2,318 02,318 
Stock-based compensation expense0 0 0 0 7,888 0 7,888 
Interest expense0 0 0 21,178 0 0 21,178 
Total expenses571,473 221,993 (2,186)175,276 76,382 4,828 1,047,766 
Subtotal136,646 72,180 2,187 60,544 (76,087)(4,828)190,642 
Non-operating items— — — — — 4,828 (2)4,828 
Measure of segment profitability (pretax)
$136,646 $72,180 $2,187 $60,544 $(76,087)$0 195,470 
Realized gain (loss)—investments28,152 
Legal proceedings(4,828)
$218,794 
 Three Months Ended September 30, 2017
 Life Health Annuity Investment Other &
Corporate		 Adjustments  Consolidated
Revenue:              
Premium$576,223
 $242,991
 $3
        $819,217
Net investment income      $213,872
      213,872
Other income        $361
 $(30) (2)331
    Total revenue576,223
 242,991
 3
 213,872
 361
 (30)  1,033,420
Expenses:              
Policy benefits386,445
 155,774
 9,000
     

 
551,219
Required interest on reserves(152,862) (19,617) (12,433) 184,912
      —
Required interest on DAC46,893
 5,881
 172
 (52,946)      —
Amortization of acquisition costs98,268
 23,458
 608
        122,334
Commissions, premium taxes, and non-deferred acquisition costs44,748
 21,746
 7
     1,362
 (2,3)67,863
Insurance administrative expense(1)
        52,426
 

 
52,426
Parent expense        2,330
    2,330
Stock compensation expense        8,263
    8,263
Interest expense      20,970
      20,970
Total expenses423,492
 187,242
 (2,646) 152,936
 63,019
 1,362
  825,405
Subtotal152,731
 55,749
 2,649
 60,936
 (62,658) (1,392)  208,015
Non-operating items          1,392
 (3)1,392
Measure of segment profitability (pretax)$152,731
 $55,749
 $2,649
 $60,936
 $(62,658) $—
  209,407
Deduct applicable income taxes  (63,342)
Segment profits after tax  146,065
Add back income taxes applicable to segment profitability  63,342
Add (deduct) realized investment gains (losses) 
   
12,595
Add (deduct) guaranty fund assessments(3)
  (1,392)
Pretax income from continuing operations per Condensed Consolidated Statements of Operations 
   
$220,610

(1)Administrative expense is not allocated to insurance segments.
(2) Elimination of intersegment commission.Legal proceedings.
(3) Guaranty fund assessments.






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TORCHMARK CORPORATIONGlobe Life Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements
(UNAUDITED)(Unaudited)
(Dollar amounts in thousands, except per share data)

Note 10—Business Segments (continued)
Three Months Ended March 31, 2020
LifeHealthAnnuityInvestmentCorporate & OtherAdjustmentsConsolidated
Revenue:
Premium$649,630 $280,205 $0 $0 $0 $0 $929,835 
Net investment income0 0 0 228,991 0 0 228,991 
Other income0 0 0 0 325 0 325 
Total revenue649,630 280,205 0 228,991 325 0 1,159,151 
Expenses:
Policy benefits421,670 178,711 7,588 0 0 0 607,969 
Required interest on reserves(171,205)(22,510)(10,456)204,171 0 0 0 
Required interest on DAC52,118 6,519 88 (58,725)0 0 0 
Amortization of acquisition costs114,308 29,025 504 0 0 0 143,837 
Commissions, premium taxes, and non-deferred acquisition costs53,936 24,995 6 0 0 0 78,937 
Insurance administrative expense(1)
0 0 0 0 63,620 3,275 (2)66,895 
Parent expense0 0 0 0 2,331 0 2,331 
Stock-based compensation expense0 0 0 0 9,356 0 9,356 
Interest expense0 0 0 20,808 0 0 20,808 
Total expenses470,827 216,740 (2,270)166,254 75,307 3,275 930,133 
Subtotal178,803 63,465 2,270 62,737 (74,982)(3,275)229,018 
Non-operating items— — — — — 3,275 (2)3,275 
Measure of segment profitability (pretax)
$178,803 $63,465 $2,270 $62,737 $(74,982)$0 232,293 
Realized gain (loss)—investments(26,097)
Legal proceedings(3,275)
$202,921 

 Three Months Ended September 30, 2016
 Life Health Annuity Investment Other &
Corporate		 Adjustments  Consolidated
Revenue:              
Premium$546,415
 $236,987
 $9
 ��      $783,411
Net investment income      $202,720
      202,720
Other income        $199
 $(39) (2)160
Total revenue546,415
 236,987
 9

202,720
 199
 (39)  986,291
Expenses:              
Policy benefits369,546
 153,351
 9,255
        532,152
Required interest on reserves(145,295) (18,476) (12,761) 176,532
      —
Required interest on DAC44,950
 5,789
 192
 (50,931)      —
Amortization of acquisition costs93,496
 22,643
 682
        116,821
Commissions, premium taxes, and non-deferred acquisition costs40,577
 20,604
 11
     (39) (2)61,153
Insurance administrative expense(1)
        49,248
 257
  49,505
Parent expense        1,955
    1,955
Stock compensation expense        6,345
    6,345
Interest expense      20,381
      20,381
Total expenses403,274
 183,911
 (2,621) 145,982
 57,548
 218
  788,312
Subtotal143,141
 53,076
 2,630
 56,738
 (57,349) (257)  197,979
Non-operating items          257
  257
Measure of segment profitability (pretax)$143,141
 $53,076
 $2,630
 $56,738
 $(57,349) $—
  198,236
Deduct applicable income taxes  (58,422)
Segment profits after tax  139,814
Add back income taxes applicable to segment profitability  58,422
Add (deduct) realized investment gains (losses) 
   
3,482
Add (deduct) non-operating fees  (257)
Pretax income from continuing operations per Condensed Consolidated Statements of Operations 
   
$201,461

(1)Administrative expense is not allocated to insurance segments.
(2) Elimination of intersegment commission.Legal proceedings.




23

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TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIALCAUTIONARY STATEMENTS
(UNAUDITED)
(DollarWe caution readers regarding certain forward-looking statements contained in the foregoing discussion and elsewhere in this document, and in any other statements made by, or on behalf of Globe Life whether or not in future filings with the Securities and Exchange Commission. Any statement that is not a historical fact, or that might otherwise be considered an opinion or projection concerning the Company or its business, whether express or implied, is meant as and should be considered a forward-looking statement. Such statements represent management's opinions concerning future operations, strategies, financial results or other developments. We specifically disclaim any obligation to update or revise any forward-looking statement because of new information, future developments, or otherwise.
Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control, including uncertainties related to the impact of the COVID-19 outbreak on our business operations, financial results and financial condition. If these estimates or assumptions prove to be incorrect, the actual results of Globe Life may differ materially from the forward-looking statements made on the basis of such estimates or assumptions. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, which may be national in scope, related to the insurance industry generally, or applicable to the Company specifically. Such events or developments could include, but are not necessarily limited to:

1.Economic and other conditions, including the COVID-19 pandemic and its impact on the U.S. economy, leading to unexpected changes in lapse rates and/or sales of our policies, as well as levels of mortality, morbidity, and utilization of health care services that differ from Globe Life's assumptions;
2.Regulatory developments, including changes in accounting standards or governmental regulations (particularly those impacting taxes and changes to the Federal Medicare program that would affect Medicare Supplement);
3.Market trends in the senior-aged health care industry that provide alternatives to traditional Medicare (such as Health Maintenance Organizations and other managed care or private plans) and that could affect the sales of traditional Medicare Supplement insurance;
4.Interest rate changes that affect product sales and/or investment portfolio yield;
5.General economic, industry sector or individual debt issuers’ financial conditions (including developments and volatility arising from the COVID-19 pandemic, particularly in certain industries that may comprise part of our investment portfolio) that may affect the current market value of securities we own, or that may impair an issuer’s ability to make principal and/or interest payments due on those securities;
6.Changes in the competitiveness of the Company's products and pricing;
7.Litigation results;
8.Levels of administrative and operational efficiencies that differ from our assumptions (including any reduction in efficiencies resulting from increased costs arising from operating during the COVID-19 pandemic);
9.The ability to obtain timely and appropriate premium rate increases for health insurance policies from our regulators;
10.The customer response to new products and marketing initiatives;
11.Reported amounts in thousands, except per share data)the consolidated financial statements which are based on management estimates and judgments which may differ from the actual amounts ultimately realized;

12.Compromise by a malicious actor or other event that causes a loss of secure data from, or inaccessibility to, our computer and other information technology systems;
Note 10—Business Segments (continued)13.The severity, magnitude and impact of the COVID-19 pandemic, including effects of the pandemic and the effects of the U.S. and state governments' and other businesses’ response to the pandemic, on our operations and personnel, and on commercial activity and demand for our products; and
14.Our ability to access the commercial paper and debt markets, particularly if such markets become unpredictable or unstable for a certain period as a result of the COVID-19 pandemic.

Readers are also directed to consider other risks and uncertainties described in other documents on file with the Securities and Exchange Commission.

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GL Q1 2021 FORM 10-Q

 Nine Months Ended September 30, 2017
 Life Health Annuity Investment Other &
Corporate		 Adjustments 
  
Consolidated
Revenue:              
Premium$1,725,896
 $730,557
 $9
 
 
 

 
$2,456,462
Net investment income
 
 
 $634,930
 
 

 
634,930
Other income
 
 
 
 $1,239
 $(99) (2)1,140
    Total revenue1,725,896
 730,557
 9
 634,930
 1,239
 (99) 
3,092,532
Expenses:              
Policy benefits1,166,289
 470,104
 26,923
 
 
 2,094
 (3)1,665,410
Required interest on reserves(452,339) (57,859) (37,245) 547,443
 
 
 
—
Required interest on DAC139,042
 17,530
 524
 (157,096) 
 
 
—
Amortization of acquisition costs296,646
 71,801
 1,916
 
 
 
 
370,363
Commissions, premium taxes, and non-deferred acquisition costs132,094
 64,599
 25
 

 

 1,293
 (2,4)198,011
Insurance administrative expense(1)


 

 

 

 155,751
 

 
155,751
Parent expense

 

 

 

 7,228
 

 
7,228
Stock compensation expense

 

 

 

 24,809
 

 
24,809
Interest expense

 

 

 62,825
 

 

 
62,825
Total expenses1,281,732
 566,175
 (7,857) 453,172
 187,788
 3,387
  2,484,397
Subtotal444,164
 164,382
 7,866
 181,758
 (186,549) (3,486)  608,135
Non-operating items          3,486
 (3,4)3,486
Measure of segment profitability (pretax)$444,164
 $164,382
 $7,866
 $181,758
 $(186,549) $—
  611,621
Deduct applicable income taxes  (184,703)
Segment profits after tax  426,918
Add back income taxes applicable to segment profitability  184,703
Add (deduct) realized investment gains (losses) 
   
6,142
Add (deduct) administrative settlements(3)
  (2,094)
Add (deduct) guaranty fund assessments (4)
  (1,392)
Pretax income from continuing operations per Condensed Consolidated Statements of Operations 
   
$614,277

(1) Administrative expense is not allocated to insurance segments.
(2) Elimination of intersegment commission.
(3) Administrative settlements.
(4) Guaranty fund assessments.




24
Table of Contents
TORCHMARK CORPORATIONGLOBE LIFE INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSManagement's Discussion & Analysis
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 10—Business Segments (continued)

 Nine Months Ended September 30, 2016
 Life Health Annuity Investment Other &
Corporate		 Adjustments  Consolidated
Revenue:              
Premium$1,639,156
 $709,936
 $34
       
$2,349,126
Net investment income

 

 

 $601,415
     
601,415
Other income

 

 

 

 $1,086
 $(123) (2)963
Total revenue1,639,156
 709,936
 34
 601,415
 1,086
 (123)  2,951,504
Expenses:              
Policy benefits1,101,748
 459,387
 27,475
 

 

 

 
1,588,610
Required interest on reserves(430,931) (54,803) (38,359) 524,093
 

 

 
—
Required interest on DAC133,628
 17,297
 621
 (151,546) 

 

 
—
Amortization of acquisition costs281,698
 67,110
 4,064
 

 

 

 
352,872
Commissions, premium taxes, and non-deferred acquisition costs121,968
 63,733
 31
 

 

 (123) (2)185,609
Insurance administrative expense (1)


 

 

 

 146,129
 257
 
146,386
Parent expense

 

 

 

 6,360
 

 
6,360
Stock compensation expense

 

 

 

 20,334
 

 
20,334
Interest expense

 

 

 62,860
 

 

 
62,860
Total expenses1,208,111
 552,724
 (6,168)
435,407
 172,823
 134
  2,363,031
Subtotal431,045
 157,212
 6,202
 166,008
 (171,737) (257)  588,473
Non-operating items          257
  257
Measure of segment profitability (pretax)$431,045
 $157,212
 $6,202
 $166,008
 $(171,737) $—
  588,730
Deduct applicable income taxes  (178,842)
Segment profits after tax  409,888
Add back income taxes applicable to segment profitability  178,842
Add (deduct) realized investment gains (losses)   7,780
Add (deduct) non-operating fees  (257)
Pretax income from continuing operations per Condensed Consolidated Statements of Operations   $596,253

(1) Administrative expense is not allocated to insurance segments.
(2) Elimination of intersegment commission.





25
Table of Contents
TORCHMARK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)

Note 10—Business Segments (continued)

The following table summarizes the measures of segment profitability for comparison. It also reconciles segment profits to net income.
Analysis of Profitability by Segment
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Life insurance underwriting margin$152,731
 $143,141
 $444,164
 $431,045
Health insurance underwriting margin55,749
 53,076
 164,382
 157,212
Annuity underwriting margin2,649
 2,630
 7,866
 6,202
Excess investment income60,936
 56,738
 181,758
 166,008
Other insurance:       
Other income361
 199
 1,239
 1,086
Administrative expense(52,426) (49,248) (155,751) (146,129)
Corporate and adjustments(10,593) (8,300) (32,037) (26,694)
Segment profits before tax209,407
 198,236
 611,621
 588,730
Applicable taxes(63,342) (58,422) (184,703) (178,842)
Segment profits after tax146,065
 139,814
 426,918
 409,888
Discontinued operations (after tax)(12) 9,959
 (3,739) (447)
After-tax total, after discontinued operations146,053
 149,773
 423,179
 409,441

       
Realized gains (losses)—investments (after tax)8,186
 2,263
 6,235
 5,057
Administrative settlements (after tax)—
 —
 (1,361) —
Guaranty fund assessments (after tax)(905) —
 (905) —
Non-operating fees (after tax)—
 (167) —
 (167)
Net income$153,334
 $151,869
 $427,148
 $414,331


26
Table of Contents




Item 2. Management’sManagement's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Globe Life's Condensed Consolidated Financial Statements and Notes thereto appearing elsewhere in this report.
"Globe Life" and the "Company" refer to Globe Life Inc. and its subsidiaries and affiliates.


Results of Operations

gl-20210331_g1.jpg
How Globe Life Views Its Operations. Globe Life Inc. is the holding company for a group of insurance companies that market primarily individual life and supplemental health insurance to lower middle to middle income households throughout the United States. We view our operations by segments, which are the insurance product lines of life, supplemental health, and annuities, and the investment segment that supports the product lines. Segments are aligned based on their common characteristics, comparability of the profit margins, and management techniques used to operate each segment.
gl-20210331_g2.jpg
Insurance Product Line Segments. The insurance product line segments involve the marketing, underwriting, and administration of policies. Each product line is further segmented by the various distribution channels that market the insurance policies. Each distribution channel operates in a niche market offering insurance products designed for that particular market. Whether analyzing profitability of a segment as a whole, or the individual distribution channels within the segment, the measure of profitability used by management is the underwriting margin, as seen below:

Premium revenue
                                                           (Policy obligations)
(Policy acquisition costs and commissions)
Underwriting margin

gl-20210331_g3.jpg
Investment Segment.The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability for the investment segment is excess investment income, as seen below:
Net investment income
(Required interest on net policy liabilities)
(Financing costs)
Excess investment income



32
GL Q1 2021 FORM 10-Q
GLOBE LIFE INC.
Management's Discussion & Analysis
Current Highlights, comparing first quarter 2021 with 2020.
•Net income as a return on equity (ROE) for the three months ended March 31, 2021 was 8.6% and net operating income as an ROE, excluding net unrealized gains on the fixed maturity portfolio(1) was 11.4%.
•Total premium increased 8% over the same period in the prior year. Life premium increased 9% for the period from $650 million in 2020 to $708 million in 2021. Life underwriting margin declined 24% from $179 million in 2020 to $137 million in 2021.
•Total premium revenue exceeded $1 billion in a quarter for the first time in Company history.
•Net investment income increased 3% over the same period in the prior year. Excess investment income declined 3% below the prior year.
•Total net sales increased 10% over the same period in the prior year from $153 million to $168 million.
•Book value per share increased 23% over the same period in the prior year from $60.98 to $75.10. Book value per share, excluding net unrealized gains on the fixed maturity portfolio(1), increased 9% over the prior year from $49.66 to $54.36.
•The Company estimates $38 million of net life claims were incurred as a result of the novel coronavirus (COVID-19) for the three months ended March 31, 2021.
•For the three months ended March 31, 2021, the Company repurchased 944 thousand shares of Globe Life Inc. common stock at a total cost of $90 million for an average share price of $95.47.
The following graphs represent net income and net operating income for three months ended March 31, 2021 and 2020.

gl-20210331_g4.gifgl-20210331_g5.gif
(1) Net operating income is the consolidated total of segment profits after tax and as such is considered a non-GAAP measure. It has been used consistently by Globe Life's management for many years to evaluate the operating performance of the Company. It differs from net income primarily because it excludes certain non-operating items such as realized gains and losses and certain significant and unusual items included in net income. Net income is the most directly comparable GAAP measure.
Net operating income as an ROE, excluding net unrealized gains on the fixed maturity portfolio, is considered a non-GAAP measure. Management utilizes this measure to view the business without the effect of the net unrealized gains, which are primarily attributable to fluctuation in interest rates on the available-for-sale portfolio. The impact of the adjustment to exclude net unrealized gains on fixed maturities, net of tax is $2.2 billion and $1.2 billion for three months ended March 31, 2021 and 2020, respectively.

Book value per share, excluding net unrealized gains on the fixed maturity portfolio, is also considered a non-GAAP measure. Management utilizes this measure to view the book value of the business without the effect of net unrealized gains, which are primarily attributable to fluctuation in interest rates on the available for sale portfolio. The impact of the adjustment to exclude net unrealized gains on fixed maturities is $20.74 and $11.32 for March 31, 2021 and 2020, respectively.
Refer to Analysis of Profitability by Segment for non-GAAP reconciliation to GAAP.


33
GL Q1 2021 FORM 10-Q
GLOBE LIFE INC.
Management's Discussion & Analysis

Summary of OperationsOperations. Net income increased 8% to $179 million during the three months ended March 31, 2021, compared with $166 million in the same period in 2020. This increase was primarily attributed to $22 million of after tax realized gains on investments in the current quarter, as compared to $21 million of after tax realized losses on investments in the year-ago period. See further discussion under the caption Investments. Torchmark’sThe increase in after tax realized gains was partially offset by lower underwriting results due to higher COVID-19 claims. On a diluted per common share basis, net income per common share for the three months ended March 31, 2021 increased 12% from $1.52 to $1.70.

Net operating income is the consolidated total of segment profits after-tax and as such is considered a non-GAAP measure. Net operating income declined 15% to $160 million for the three months ended March 31, 2021, compared with $189 million for the same period in 2020 primarily due to COVID-19 life claims. On a diluted per common share basis, net operating income per common share for the three months ended March 31, 2021 declined 12% from $1.73 to $1.53.

COVID-19. For the three months ended March 31, 2021, we estimate $38 million of COVID-19 net life claims were incurred. At the midpoint of our 2021 guidance, we are projecting approximately $50 million of COVID-19 net life claims will be incurred in 2021, based on an estimate of approximately 270,000 U.S. deaths over the course of the year. This estimate of U.S. deaths is based on various third-party models. The projected life claims are dependent on this estimate and many other variables, including, but not limited to, the effect of efforts to reopen the economy, the timing and availability of effective treatments for the disease, and the actual ages and states in which infections and deaths occur.

Globe Life's operations on a segment-by-segment basis are segmented into itsdiscussed in depth below. Net operating income has been used consistently by management for many years to evaluate the operating performance of the Company, and is a measure commonly used in the life insurance industry. It differs from GAAP net income primarily because it excludes certain non-operating items such as realized gains and losses and other significant and unusual items included in net income. Management believes an analysis of net operating income is important in understanding the profitability and operating trends of the Company’s business. Net income is the most directly comparable GAAP measure.

Analysis of Profitability by Segment
(Dollar amounts in thousands)
Three Months Ended March 31,
20212020Change%
Life insurance underwriting margin$136,646 $178,803 $(42,157)(24)
Health insurance underwriting margin72,180 63,465 8,715 14 
Annuity underwriting margin2,187 2,270 (83)(4)
Excess investment income60,544 62,737 (2,193)(3)
Other insurance:
Other income295 325 (30)(9)
Administrative expense(66,176)(63,620)(2,556)4 
Corporate and other(10,206)(11,687)1,481 (13)
Pre-tax total195,470 232,293 (36,823)(16)
Applicable taxes(35,379)(43,549)8,170 (19)
Net operating income
160,091 188,744 (28,653)(15)
Reconciling items, net of tax:
Realized gain (loss)—investments22,240 (20,617)42,857 
Legal proceedings(3,814)(2,587)(1,227)
Net income
$178,517 $165,540 $12,977 8 


34
GL Q1 2021 FORM 10-Q
GLOBE LIFE INC.
Management's Discussion & Analysis
In 2021, the largest contributor of total underwriting margin was the life insurance segment and the primary distribution channel was American Income Life Division. The following tables represent the breakdown of total underwriting margin by operating segment and distribution channel for the three months ended March 31, 2021.

gl-20210331_g6.gifgl-20210331_g7.gif

Total premium income rose 8% for the three months ended March 31, 2021 to $1.0 billion. Total net sales increased 10% to $168 million, when compared with the same period in 2020. Total first-year collected premium was $141 million for the 2021 period, compared with $128 million for the 2020 period.

Life insurance premium income increased 9% to $708 million over the prior year total of $650 million. Life net sales rose 16% to $128 million for the first three months of 2021. First-year collected life premium rose 21% to $103 million. Life underwriting margins, as a percent of premium, declined to 19% in 2021 from 28% in the prior year. Underwriting margin declined to $137 million for the three months ended March 31, 2021, 24% below the same period in 2020. The decline in the life underwriting margin is primarily due to an estimated $38 million of COVID-19 net life claims incurred during the first three months of 2021.

Health insurance premium income increased 5% to $294 million over the prior year total of $280 million. Health net sales fell 6% to $40 million for the first three months of 2021. First-year collected health premium fell 11% to $38 million. Health underwriting margins, as a percent of premium, increased to 25% in 2021 compared with 23% in 2020. Health underwriting margin increased to $72 million for the first three months of 2021, 14% over the same period in 2020.

Excess investment income, the measure of profitability of our investment segment, declined 3% during 2021 to $61 million from $63 million in the same period in 2020. Excess investment income per common share, reflecting the impact of our share repurchase program, increased 2% to $0.58 from $0.57 in the same period last year.

Insurance administrative expenses increased 4.0% in 2021 when compared with the prior year period. These expenses were 6.6% as a percent of premium during 2021, compared with 6.8% a year earlier.

For the three months ended March 31, 2021, the Company repurchased 944 thousand Globe Life Inc. shares at a total cost of $90 million for an average share price of $95.47.

35
GL Q1 2021 FORM 10-Q
GLOBE LIFE INC.
Management's Discussion & Analysis
The discussions of our segments are presented in the manner we view our operations, as described in Note 10—9—Business Segmentsin the Notes to the Condensed Consolidated Financial Statements. The measures of profitability are useful in evaluating the performance of the segments and the marketing groups within each insurance segment because each of our distribution channels operates in a niche market. Insurance underwriting margin consists of premium less policy obligations, commissions and other acquisition expenses. These measures enable management to view period-to-period trends, and to make informed decisions regarding future courses of action.
The tables in Note 10 demonstrate how the measures of profitability are determined. Those tables also reconcile our revenues and expenses by segment to major income statement line items for the three month and nine month periods ended September 30, 2017 and 2016. Additionally, a table in that note, Analysis of Profitability by Segment, provides a summary of profitability measures that demonstrates year-to-year comparability and reconciles those measures to our net income. That summary represents our overall operations in the manner that management views the business, and is a basis of the following highlights discussion.
We use three statistical measures as indicators of future premium growth:growth and sales over the near term: “annualized premium in force", "net sales",force,” “net sales,” and “first-year collected premium.”
•Annualized premium in force is defined as the premium income that would be received over the following twelve months at any given date on all active policies if those policies remain in force throughout the twelve monthtwelve-month period. Annualized premium in force is an indicator of potential growth in premium revenue.
•Net sales, a statistical performance measure, is definedcalculated as annualized premium issued,(1), net of cancellations in the first thirty days after issue, except for Globe Lifein the case of Direct Response,to Consumer, where net sales is annualized premium issued at the time the first full premium is paid after any introductory offer period has expired. Although lapses and terminations will occur, we believe thatManagement considers net sales isto be a usefulbetter indicator of the rate of acceleration of premium growth. growth than annualized premium issued.
•First-year collected premium is defined as the premium collected during the reporting period for all policies in their first policy year. First-year collected premium takes lapses into account in the first policy year when lapses are more likely to occur, and thus is a useful indicator of how much new premium is expected to be added to premium income in the future.
A
See further discussion of operations by each segment follows later in this report. These discussions compare the first nine months of 2017 with the same period of 2016, unless otherwise noteddistribution channels below for Life and Health. The following discussions are presented in the manner we view our operations, as described in Note 10.














(1) Annualized premium issued is the gross premium that would be received during the policies’ first year in force, assuming that none of the policies lapsed or terminated.


27

36
GL Q1 2021 FORM 10-Q
Table of Contents

GLOBE LIFE INC.


Management's Discussion & Analysis

LIFE INSURANCE
Highlights, comparing the first nine months of 2017 with the first nine months of 2016.
Net income per diluted common share increased6% to $3.58 from $3.38. Included in net income were after-tax realized gains of $6.2 million in 2017compared with gains of $5.1 million for the same period in2016. Realized gains and losses are presented more fully under the caption Realized Gains and Losses in this report. Net operating income from continuing operations is the consolidated total of segment profits after tax and as such is considered a non-GAAP measure. Net operating income from continuing operations increased 4% or $17 million to $427 million for the nine months ended September 30, 2017 compared with $410 million for the same 2016 period.
Total premium income rose 5% in 2017 to $2.5 billion. Total net sales increased 2% to $420 million, when compared with the same period in 2016. First-year collected premium was $339 million for the 2017 period, compared with $340 million for the 2016 period.
Life insurance premium income grew 5% to $1.7 billion. Life net sales increased 1% when compared withis the same period in 2016. First-year collectedCompany's predominant segment. During 2021, life premium grew 1% during the first nine monthsrepresented 71% of 2017 to $239 million over the same period in 2016. Lifetotal premium and life underwriting margin as a percentage of premium was flat at 26%. Underwriting income increased 3% to $444 million when compared with the same period in 2016.
Health insurance premium income increased 3% to $731 million over the prior year total of $710 million. Health net sales rose 6% to $104 million for the nine month period. First-year collected health premium fell 4% to $100 million. Health margins increased to 23% from 22% a year earlier. Underwriting income increased 5% to $164 million for the first nine months of 2017.
Insurance administrative expenses were up 6.6% in 2017 when compared with the prior year period. These expenses were 6.3% as a percentage of premium during the first nine months of 2017 compared with 6.2% a year earlier. The increase in administrative expenses was primarily due to an increase in other employee costs and investments in information technology.
Excess investment income is defined as net investment income less the required interest on net policy liabilities and the interest cost associated with capital funding or “financing costs”. Excess investment income per diluted common share is an important measure to management. Refer to the Excess Investment Income section of this report for further details. Excess investment income per common share increased 13% in 2017 to $1.52 from $1.35 in the same period last year, while the dollar amount of excess investment income increased 9% to $182 million. Net investment income rose $34 million or 6% to $635 million in 2017, below the 7% growth in our average investment portfolio at amortized cost. The average effective yield earned on the fixed maturity portfolio, which represented 96% of our investments at amortized cost, decreased to 5.68% in the 2017 period from 5.80% in the prior period. Required interest rose 5% or $18 million to $390 million, in line with the growth in average net policy liabilities. Financing costs were flat at$63 million. Please refer to the discussion under Capital Resources for more information on debt and interest expense.
In the first nine months of 2017, we invested new money in fixed maturity securities at an effective annual yield of 4.74%, compared with 4.73% in the same period of 2016. These new investments had an average rating of BBB+ and an average life to maturity of twenty-four years. Approximately 96%65% of the fixed-maturity portfolio at amortized cost was investment grade at September 30, 2017. Cash and short-term investments were $154 million at that date, compared with $148 million at December 31, 2016.
The net unrealized gain position in our fixed maturity portfolio grew from $1.1 billion at December 31, 2016 to $1.7 billion at September 30, 2017 due primarily to changes in market interest rates.

28
Table of Contents




Share Repurchases. We have an on-going share repurchase program which began in 1986 that is reviewed quarterly and is reaffirmed by the Board of Directors on an annual basis. The program was reaffirmed on August 7, 2017. With no specified authorization amount, we determine the amount of repurchases based on the amount of our excess cash flow, general market conditions, and other alternative uses. These purchases are made at the Parent Company with excess cash flow. Excess cash flow is primarily made up of cash received from the insurance subsidiaries less dividends paid to shareholders and interest paid on our debt. See further discussion in the Capital Resources section below. Share purchases are also made with the proceeds from option exercises by current and former employees in order to reduce dilution. The following chart summarizes share purchases for the nine month periods ended September 30, 2017 and 2016.

Analysis of Share Purchases
(Amounts in thousands, except per share data) 

 Nine Months Ended September 30,
 2017 2016
 Shares Amount Average
Price		 Shares Amount Average
Price
Purchases with:
 
 
 
 
 
Excess cash flow at the Parent Company3,176
 $242,841
 $76.46
 4,170
 $240,108
 $57.58
Option exercise proceeds760
 58,607
 77.16
 1,180
 71,248
 60.38
Total3,936
 $301,448
 $76.59
 5,350
 $311,356
 $58.20
Throughout the remainder of this discussion, share purchases will only refer to those made from excess cash flow.
A detailed discussion of our operations by component segment follows.
Life insurance, comparing the first nine months of 2017 with the first nine months of 2016. Life insurance is our predominant segment, representing 70% of premium income and 72% of insurance underwriting margin in the first nine months of 2017. In addition,total. Additionally, investments supporting the reserves for life business generateproducts produce the majority of excess investment income attributable to the investment segment.
The following table presents the summary of results forof life insurance.Further discussion of the results by distribution channel is included below.

Life Insurance
Summary of Results
(Dollar amounts in thousands)
 
 Nine Months Ended September 30, Increase
 2017 2016 (Decrease)
 Amount % of
Premium		 Amount % of
Premium		 Amount %
Premium and policy charges$1,725,896
 100 $1,639,156
 100 $86,740
 5
Net policy obligations713,950
 41 670,817
 41 43,133
 6
Commissions and acquisition expense567,782
 33 537,294
 33 30,488
 6
Insurance underwriting income before other income and administrative expense$444,164
 26 $431,045
 26 $13,119
 3
Life Insurance

Summary of Results

(Dollar amounts in thousands)
Three Months Ended March 31,Change
20212020
Amount% of PremiumAmount% of PremiumAmount%
Premium and policy charges$708,119 100 $649,630 100 $58,489 9 
Policy obligations517,631 73 421,670 65 95,961 23 
Required interest on reserves(179,925)(25)(171,205)(27)(8,720)5 
Net policy obligations337,706 48 250,465 38 87,241 35 
Commissions, premium taxes, and non-deferred acquisition expenses56,668 8 53,936 8 2,732 5 
Amortization of acquisition costs177,099 25 166,426 26 10,673 6 
Total expense571,473 81 470,827 72 100,646 21 
Insurance underwriting margin
$136,646 19 $178,803 28 $(42,157)(24)
29
TableThe lower life insurance underwriting margins for three months ended March 31, 2021 are primarily attributed to an estimated $38 million of Contentsnet life claims due to COVID-19 deaths.






The following table presents Torchmark’sGlobe Life's life insurance premium by distribution channel.

Life Insurance
Premium by Distribution Channel
(Dollar amounts in thousands)
Three Months Ended March 31,Increase
(Decrease)
20212020
Amount% of TotalAmount% of TotalAmount%
American Income$334,895 47 $302,852 47 $32,043 11 
Direct to Consumer244,028 34 220,043 34 23,985 11 
Liberty National75,737 11 72,868 11 2,869 4 
Other53,459 8 53,867 8 (408)(1)
Total
$708,119 100 $649,630 100 $58,489 9 

Annualized life premium in force was $2.79 billion at March 31, 2021, an increase of 7% over $2.60 billion a year earlier.


37
GL Q1 2021 FORM 10-Q
 Nine Months Ended September 30, Increase
 2017 2016 (Decrease)
 Amount % of
Total		 Amount % of
Total		 Amount
%
American Income Exclusive Agency$741,392
 43 $677,702
 41 $63,690
 9
Globe Life Direct Response613,568
 35 591,084
 36 22,484
 4
Liberty National Exclusive Agency205,775
 12 203,040
 13 2,735
 1
Other Agencies165,161
 10 167,330
 10 (2,169) (1)
Total$1,725,896
 100 $1,639,156
 100 $86,740
 5
Table of Contents
NetGlobe Life Inc.
Management's Discussion & Analysis

An analysis of life net sales, an indicator of new business production, increased 1% to $316 million when compared with the same period in 2016. An analysis of life net sales by distribution channel is presented below.

Life Insurance
Net Sales by Distribution Channel
(Dollar amounts in thousands)
Three Months Ended March 31,Increase
(Decrease)
20212020
Amount% of TotalAmount% of TotalAmount%
American Income$69,623 54 $62,869 57 $6,754 11 
Direct to Consumer39,691 31 32,547 29 7,144 22 
Liberty National16,225 13 12,488 11 3,737 30 
Other2,688 2 2,709 3 (21)(1)
Total
$128,227 100 $110,613 100 $17,614 16 


Life Insurance
Net Sales
(Dollar amounts in thousands)
 Nine Months Ended September 30,
Increase
 2017 2016 (Decrease)
 Amount % of
Total		 Amount % of
Total		 Amount %
American Income Exclusive Agency$167,478
 53 $157,949
 50 $9,529
 6
Globe Life Direct Response106,652
 34 116,224
 37 (9,572) (8)
Liberty National Exclusive Agency34,609
 11 29,856
 10 4,753
 16
Other Agencies7,501
 2 9,063
 3 (1,562) (17)
Total$316,240
 100 $313,092
 100 $3,148
 1
First-year collected life premium, defined earlier in this report, was $239 million in the 2017 period, rising 1% over the same period in 2016. First-year collected life premium by distribution channel is presented in the table below.

Life Insurance
First-Year Collected Premium by Distribution Channel
(Dollar amounts in thousands)
Three Months Ended March 31,Increase
(Decrease)
20212020
Amount% of TotalAmount% of TotalAmount%
American Income$58,597 57 $50,669 60 $7,928 16 
Direct to Consumer30,627 30 21,094 25 9,533 45 
Liberty National11,240 11 10,666 12 574 5 
Other2,330 2 2,652 3 (322)(12)
Total
$102,794 100 $85,081 100 $17,713 21 

A discussion of life operations by distribution channel follows.
Life Insurance
First-Year Collected Premium
(Dollar amounts in thousands)
 Nine Months Ended September 30,
Increase
 2017
2016
(Decrease)
 Amount
% of
Total
Amount
% of
Total
Amount
%
American Income Exclusive Agency$135,935
 57 $129,878
 55 $6,057
 5
Globe Life Direct Response70,989
 30 75,784
 32 (4,795) (6)
Liberty National Exclusive Agency24,587
 10 21,707
 9 2,880
 13
Other Agencies7,325
 3 8,801
 4 (1,476) (17)
Total$238,836
 100 $236,170
 100 $2,666
 1


30
Table of Contents




The American Income Exclusive Agency has historically marketed primarilyLife Division markets to members of labor unions. While labor unions are still the core market for this agency, American Income has diversified in recent yearsand continues to diversify its lead sources by focusing heavily on referrals andbuilding relationships with other affinity groups, utilizing third-party internet vendor leads, and obtaining referrals to help ensurefacilitate sustainable growth. This agencydivision is theGlobe Life's largest contributor to life premium and underwriting margin of any distribution channel. channel at 47% of the Company's first quarter total. Net sales increased 11% to $70 million during the first three months of 2021 over the 2020 total for the same period of $63 million. The underwriting margin, as a percent of premium, was 29% for the three months ended March 31, 2021, down from 33% in the year-ago period. The lower underwriting margin was primarily due to COVID-19 claims.

This group produced premium income of $741 million,division is anticipating an increase of 9%. First-year collected premium was $136 million, an increase of 5%. Netin net sales rose 6% to $167 million.for the full year 2021 as compared with 2020. Sales growth in our exclusive agencies is generally dependent on growth in the size of the agency force. TheFor the full year, due to higher mortality from the pandemic, the underwriting margin as a percent of premium, is likely to be slightly lower.



38
GL Q1 2021 FORM 10-Q
Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

Below is the average producing agent count at the end of the period for the American Income Exclusive Agency'sLife Division. The average agent count increased 5% to 6,962 for the nine months ended September 30, 2017, compared with 6,603 for the same period in 2016. As is the case with all Torchmark agencies, the averageproducing agent count is based on the actual count at the end of each week during the period.year. The division saw a large increase in agent count compared with the prior year at the beginning of the COVID-19 pandemic. This division should see continued growth as more businesses begin to open back up from the pandemic.

At March 31,Change
20212020Amount%
American Income9,918 7,630 2,288 30 

American Income Exclusive Agency has been focusingLife continues to focus on growing and strengthening middle management to support sustainable growth of the agency force. To accomplish this,force, specifically through emphasis on agency middle-management growth and additional agency office openings. In addition to offering financial incentives and training opportunities, the agency has placed an increased emphasis on training and financial incentives that appropriately reward agents at all levels for helping develop and train its agents. These programs are designed to provide each agent, from new recruits to top level managers, coaching and instruction specifically designed for their level of experience and responsibility. We are also makingmade considerable investments in information technology, including launching a customer relationship management (CRM) tool for the agency force. This tool is designed to drive productivity in supportlead distribution, conservation of business, manager dash boards and new agent recruiting. Additionally, this division has invested in and successfully implemented technology that allows the agency.agency force to engage in virtual recruiting, training and sales activity.

The Globe Life Direct Response Unitto Consumer Division (DTC) offers adult and juvenile life insurance through a variety of direct-to-consumer marketing approaches, which includeincluding direct mailings,mail, insert media, and electronic media. These different approaches support and complement one another in the unit’s efforts to reach the consumer. The Globe Life Direct Response channel’s growth over the years has been fueled by constant innovation. In recent years, electronic media production has grown rapidly as management has aggressively increased marketing activities related to internet and mobile technology and hasas well as focused on driving traffic to anour inbound call center. The different approaches support and complement one another in the division's efforts to reach the consumer. The DTC's long-term growth has been fueled by constant innovation and name recognition. We continually introduce new initiatives in this unitdivision in an attempt to increase response rates.

While the juvenile market is an important source of sales, it also is a vehicle to reach the parents and grandparents of juvenile policyholders, who are more likely to respond favorably to a Globe Life Direct ResponseDTC solicitation for life coverage on themselves than isin comparison to the general adult population. Also, both juvenile policyholders and their parents are low acquisition-cost targets for sales of additional coverage over time.
Globe Life Direct Response’s
The DTC division continued to see high demand for its life premium income rose 4% to $614 million, representing 35% of Torchmark’s total life premiuminsurance products in the first ninecurrent quarter through its internet and inbound phone channels as a result of the response from COVID-19. Our continued investments in technology have allowed us to successfully serve the higher demands for our products through the digital self-serve and phone channels.

DTC’s underwriting margin, as a percent of premium, was 4% for the three months ended March 31, 2021, which was lower than the 17% result during the same period in 2020 primarily due to approximately $20 million of 2017. NetCOVID-19 net life claims. Additionally, this division will see a decrease in underwriting margin as a percent of premium for the full year 2021 as a result of anticipated increases in policyholder obligations driven by factors related to the COVID-19 pandemic.

The Liberty National Division markets individual life insurance to middle-income household and worksite customers. Recent investments in new sales of $107 million fortechnologies as well as recent growth in middle management within the agency will help continue this group decreased 8%. First-year collected premium decreased 6% to $71 million.growth. The underwriting margin as a percent of premium was 15.6%, up13% for the three months ended March 31, 2021, down from 15.2% in26% during the year-ago quarter. Whilesame period a year ago. The decrease is primarily attributable to higher claims will causepolicy obligations during the underwriting marginthree months ended March 31, 2021 as a result of COVID-19 compared with the same period a year ago. With the division's ability to be lowerreturn to face-to-face customer interaction and the option of virtual sales, the Company is projecting total net life sales to increase for the full year 20172021 as compared to the prior year. Similar to prior year, the underwriting margin will be slightly lower than normal due to the increased policy obligations associated with 2016, the pandemic.



39
GL Q1 2021 FORM 10-Q
Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

Below is the average producing agent count at the end of the period for Liberty National Division. As the division gains momentum in the virtual sales environment, the agency should see an increase in the quarter was fully in line with our expectations. The sales and first-year collected premium declines were expected as we continue to refine our marketing efforts in a manner intended to optimize underwriting profits.recruiting of new agents.
The Liberty National Exclusive Agency markets individual and group life insurance to middle-income customers. Life premium income for this agency was $206 million in the first nine months of 2017 compared with $203 million for the same period in 2016. First-year collected premium increased 13% to $25 million. Net sales for the Liberty National Agency increased 16% to $35 million. The increases in first-year collected premium and net sales are the largest percentage increases of any of Torchmark's life distribution channels.
At March 31,Change
20212020Amount%
Liberty National2,734 2,648 86 3 

The Liberty National Division average producing agent count increased 17% to 1,985 for3% over the nine months ended September 30, 2017 compared with 1,693 for the same period in 2016.prior year comparable period. We continue to execute our long termlong-term plan to grow this agency through expansion from small townsmall-town markets in the southeastSoutheast to more densely populated areas with larger pools of potential agent recruits and customers. ExpansionContinued geographic expansion of this agency’sagency's presence into more heavily populated, less-penetrated areas will help create long termlong-term agency growth. Additionally, our prospecting training program has helpedthe agency continues to help improve the ability of agents to develop new worksite marketing business. Systems that have been put in place, including the addition of a customer relationship management (CRM) platform and enhanced analytical capabilities, have helped the agents develop additional worksite marketing opportunities as well as improve the productivity of agents selling in the individual life market. Sales were hindered in the first half of 2020 due to difficulties in agents transitioning to a virtual work environment after the onset of the COVID-19 lockdown, as well as mandatory shut-downs of non-essential small businesses which hindered the ability of the division’s agents to prospect at the worksite. In the second half of 2020, sales improved in the worksite market as businesses were able to reopen.

The Other Agencies distribution channels primarily include non-exclusive independent agencies selling predominantly life insurance.agencies. The Other Agencies contributed $165$53 million of life premium income, or 10%8% of Torchmark’sGlobe Life's total premium income in the first ninethree months of 2017, butended March 31, 2021, and contributed only 2% of net sales for the period.


31

HEALTH INSURANCE
Health insurance, comparing the first nine months of 2017 with the first nine months of 2016.
Health insurance sold by Torchmarkthe Company includes primarily Medicare Supplement insurance, critical illness coverage, accident coverage, and other limited-benefit supplemental health products. In this analysis, all health coverage plans other than Medicare Supplement are classified as limited-benefit plans.products including cancer, critical illness, heart, and intensive care coverage.

Health premium accounted for 30%29% of our total premium in the 2017 period. Healthfirst three months of 2021, while the health underwriting margin accounted for 27%34% of total underwriting margin, reflective of the lowermargin. Health underwriting margin as a percentage of premium for health compared with life insurance. As noted under the caption Life Insurance, we have emphasizedincreased 14% to $72 million primarily due to improved persistency and lower acquisition costs. The Company continues to emphasize life insurance sales relative to health due to life’s superior long-term profitability and its greater contribution to excess investment income.



40
GL Q1 2021 FORM 10-Q
Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

The following table presents underwriting margin data for health insurance.

Health Insurance
Summary of Results
(Dollar amounts in thousands)
 Three Months Ended March 31,Change
 20212020
 Amount% of
Premium		Amount% of
Premium		Amount%
Premium$294,173 100 $280,205 100 $13,968 5 
Policy obligations187,829 64 178,711 64 9,118 5 
Required interest on reserves(24,995)(9)(22,510)(8)(2,485)11 
Net policy obligations162,834 55 156,201 56 6,633 4 
Commissions, premium taxes, and non-deferred acquisition expenses22,990 8 24,995 9 (2,005)(8)
Amortization of acquisition costs36,169 12 35,544 12 625 2 
Total expense221,993 75 216,740 77 5,253 2 
Insurance underwriting margin
$72,180 25 $63,465 23 $8,715 14 

 Nine Months Ended September 30, Increase
 2017 2016 (Decrease)
 Amount % of
Premium		 Amount % of
Premium		 Amount %
Premium and policy charges$730,557
 100 $709,936
 100 $20,621
 3
Net policy obligations412,245
 56 404,584
 57 7,661
 2
Commissions and acquisition expense153,930
 21 148,140
 21 5,790
 4
Insurance underwriting income before other income and administrative expense$164,382
 23 $157,212
 22 $7,170
 5


32
TableGlobe Life markets supplemental health insurance products through a number of Contents





distribution channels. The following table is an analysis of our health premium by distribution channel.


Health Insurance
Premium by Distribution Channel
(Dollar amounts in thousands)
 Three Months Ended March 31,Increase
(Decrease)
 20212020
Amount% of TotalAmount% of TotalAmount%
United American$117,087 40 $110,059 39 $7,028 6 
Family Heritage83,335 28 76,983 28 6,352 8 
Liberty National47,040 16 47,640 17 (600)(1)
American Income27,351 9 25,727 9 1,624 6 
Direct to Consumer19,360 7 19,796 7 (436)(2)
Total
$294,173 100 $280,205 100 $13,968 5 

Premium related to limited-benefit plans comprise $152 million, or 52%, of the total health premiums, for 2021 compared with $144 million in the same period in the prior year. Premium from Medicare Supplement products comprises the remaining $142 million, or 48%, for 2021 compared with $136 million in the same period in the prior year.

Annualized health premium in force at March 31, 2021 increased 4% to $1.2 billion over the prior year total.


41
GL Q1 2021 FORM 10-Q
 Nine Months Ended September 30,
Increase
 2017
2016
(Decrease)
 Amount
% of
Total
Amount
% of
Total
Amount
%
United American Independent Agency           
Limited-benefit plans$8,686
   $9,737
   $(1,051) (11)
Medicare Supplement263,904
   256,572
   7,332
 3
 272,590
 37 266,309
 38 6,281
 2
Family Heritage Agency           
Limited-benefit plans188,350
   175,538
   12,812
 7
Medicare Supplement—
   —
   —
 —
 188,350
 26 175,538
 25 12,812
 7
Liberty National Exclusive Agency           
Limited-benefit plans108,085
   106,343
   1,742
 2
Medicare Supplement39,988
   46,080
   (6,092) (13)
 148,073
 20 152,423
 21 (4,350) (3)
American Income Exclusive Agency           
Limited-benefit plans66,077
   62,477
   3,600
 6
Medicare Supplement198
   241
   (43) (18)
 66,275
 9 62,718
 9 3,557
 6
Direct Response           
Limited-benefit plans425
   407
   18
 4
Medicare Supplement54,844
   52,541
   2,303
 4
 55,269
 8 52,948
 7 2,321
 4
Total Health Premium           
Limited-benefit plans371,623
 51 354,502
 50 17,121
 5
Medicare Supplement358,934
 49 355,434
 50 3,500
 1
Total$730,557
 100 $709,936
 100 $20,621
 3

33
Table of Contents

Globe Life Inc.

Management's Discussion & Analysis



Presented below is a table of health net sales by distribution channel.
Health Insurance
Net Sales by Distribution Channel
(Dollar amounts in thousands)
 Three Months Ended March 31,Increase
(Decrease)
 20212020
Amount% of TotalAmount% of TotalAmount%
United American$12,945 33 $14,464 35 $(1,519)(11)
Family Heritage15,579 39 16,281 39 (702)(4)
Liberty National5,839 15 5,943 14 (104)(2)
American Income4,611 12 4,752 11 (141)(3)
Direct to Consumer642 1 590 1 52 9 
Total
$39,616 100 $42,030 100 $(2,414)(6)
 Nine Months Ended September 30,
Increase
 2017
2016
(Decrease)
 Amount
% of
Total
Amount
% of
Total
Amount
%
United American Independent Agency           
Limited-benefit plans$388
   $428
   $(40) (9)
Medicare Supplement33,052
   31,799
   1,253
 4
 33,440
 32 32,227
 33 1,213
 4
Family Heritage Agency           
Limited-benefit plans41,755
   38,144
   3,611
 9
Medicare Supplement—
   —
   —
 —
 41,755
 40 38,144
 39 3,611
 9
Liberty National Exclusive Agency           
Limited-benefit plans14,558
   14,665
   (107) (1)
Medicare Supplement—
   8
   (8) (100)
 14,558
 14 14,673
 15 (115) (1)
American Income Exclusive Agency           
Limited-benefit plans10,369
   9,463
   906
 10
Medicare Supplement—
   —
   —
 —
 10,369
 10 9,463
 9 906
 10
Direct Response           
Limited-benefit plans—
   —
   —
 —
Medicare Supplement3,790
   3,607
   183
 5
 3,790
 4 3,607
 4 183
 5
Total Net Sales           
Limited-benefit plans67,070
 65 62,700
 64 4,370
 7
Medicare Supplement36,842
 35 35,414
 36 1,428
 4
Total$103,912
 100 $98,114
 100 $5,798
 6


Health net sales related to limited-benefit plans comprise $26 million, or 66%, of the total health net sales, for 2021, compared with $27 million in the same period in the prior year. Medicare Supplement sales make up the remaining $14 million, or 34% for 2021, compared with $15 million in the same period in the prior year.
34

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The following table presents health insurance first-year collected premium by distribution channel. Health first-year collected premium fell 4% to $100 million as a result of lower group sales in 2016. Group sales can vary significantly from period to period.

Health Insurance
First-Year Collected Premium by Distribution Channel
(Dollar amounts in thousands)
 Three Months Ended March 31,Increase
(Decrease)
 20212020
Amount% of TotalAmount% of TotalAmount%
United American$14,306 37 $19,005 44 $(4,699)(25)
Family Heritage13,811 36 13,446 31 365 3 
Liberty National4,815 13 5,286 12 (471)(9)
American Income4,587 12 4,507 11 80 2 
Direct to Consumer759 2 767 2 (8)(1)
Total
$38,278 100 $43,011 100 $(4,733)(11)
 Nine Months Ended September 30, Increase
 2017
2016 (Decrease)
 Amount
% of
Total
Amount
% of
Total		 Amount
%
United American Independent Agency           
Limited-benefit plans$344
   $433
   $(89) (21)
Medicare Supplement39,306
   47,653
   (8,347) (18)
 39,650
 40
 48,086
 46
 (8,436) (18)
Family Heritage Agency           
Limited-benefit plans33,116
   30,311
   2,805
 9
Medicare Supplement—
   —
   —
 —
 33,116
 33
 30,311
 29
 2,805
 9
Liberty National Exclusive Agency           
Limited-benefit plans12,256
   11,946
   310
 3
Medicare Supplement2
   2
   —
 —
 12,258
 12
 11,948
 12
 310
 3
American Income Exclusive Agency           
Limited-benefit plans10,840
   10,188
   652
 6
Medicare Supplement—
   —
   —
 —
 10,840
 11
 10,188
 10
 652
 6
Direct Response           
Limited-benefit plans—
   —
   —
 —
Medicare Supplement4,108
   3,161
   947
 30
 4,108
 4
 3,161
 3
 947
 30
Total First-Year Collected Premium

          
Limited-benefit plans56,556
 57
 52,878
 51
 3,678
 7
Medicare Supplement43,416
 43
 50,816
 49
 (7,400) (15)
Total$99,972
 100
 $103,694
 100
 $(3,722) (4)

First-year collected premium related to limited-benefit plans comprises $23 million, or 61%, of total first-year collected premium, for 2021 compared with $23 million in the same period in the prior year. First-year collected premium from Medicare Supplement policies makes up the remaining $15 million, or 39%, for 2021, compared with $20 million in the same period in the prior year.

A discussion of health operations by distribution channel follows:follows.
The UA Independent AgencyUnited American Division consists of non-exclusive independent agencies appointed with Torchmark who may also sell for other companies. The UA Independent AgencyUnited American Division was Torchmark’sGlobe Life's largest health agency in terms of health premium income. Premium income was $273 million, representing 37%
This division is also Globe Life's largest producer of Torchmark’s total health premium. Net sales were $33 million, or 32% of Torchmark’s health sales. This agency primarily produces Medicare Supplement insurance, with Medicare Supplement premium incomeinsurance. The United American Division represents 81% of $264 million. The UA Independent Agency represents approximately 74% of all Torchmark Medicare Supplement premium and 90%95% of Medicare Supplement net sales. For the three months ended March 31, 2021, Medicare Supplement premium in this agency rose 3%. Total health premium increased 2%. Net sales7% to $115 million in 2021 over the prior period total of the$108 million. Medicare Supplement product increased 4%net sales declined 11% to $13 million in 2017 as a result of an increase in group sales. First-year collected health premium fell 18% to $40 million,2021 from the prior year period, primarily as a result of a high leveldecrease in individual sales. Underwriting margin as a percent of group salespremium was 16% for the three months ended March 31, 2021, up from 14% in the fourth quarter2020.

42
GL Q1 2021 FORM 10-Q
Table of 2015 that positively affected the 2016 first-year collected premium.Contents
Globe Life Inc.
Management's Discussion & Analysis

The Family Heritage AgencyDivision primarily markets limited-benefit supplemental health insurance in non-urban areas. Most of theirits policies include a cash-back feature, such as a return of premium, wherebywhere any excess of premiums over claims paid is returned to the policyholder at the end of a specified period stated within the insurance policy. Management expectsUnderwriting margin as a percent of premium was 26% for the three months ended March 31, 2021, up from 25% in the year-ago period primarily due to grow this agency by continuingimproved persistency and lower acquisition costs.
The division experienced a 4% decrease in net health sales as compared with the incorporationthree-month period a year ago, primarily due to a decline in agent productivity in the first quarter. The division will be launching incentive programs during the year to help drive an increase in productivity and the number of Torchmark’sproducing agents.

Below is the average producing agent recruiting programs. Thecount at the end of the period for the Family Heritage Agency contributed $42 million and $38 million in net sales in the nine months of 2017 and 2016, respectively.Division.

At March 31,Change
20212020Amount%
Family Heritage Division1,285 1,227 58 5 


35

43
GL Q1 2021 FORM 10-Q
Table of Contents

Globe Life Inc.

Management's Discussion & Analysis



Health premium income was $188 million for the nine month period of 2017, representing 26% of Torchmark’s health premium compared with $176 million or 25% of health premium in the prior year period. The average agent count was 984 for the nine months ended September 30, 2017 compared with 915 for the same period in 2016, an increase of 8%.
The Liberty National Exclusive AgencyDivision represented 20%16% of all TorchmarkGlobe Life health premium income at $148 million infor the nine months of 2017.three-month period ended March 31, 2021. The Liberty AgencyNational Division markets limited-benefit supplemental health supplemental products consisting primarily of critical illness insurance. Much of Liberty’sthis health business is now generated through worksite marketing targeting small businesses of 10 to 25100 employees. In 2017, healthHealth premium incomeat Liberty National Division was $47 million for the three months ended March 31, 2021, down from $48 million in the Liberty Agency declined $4 millionyear ago period. We anticipate an increase in net health sales at this division as the Company is able to $148 million from prior year premium. Liberty’s health premium decline is primarily due to its declining Medicare Supplement block as we are no longer selling these products from this agency.interact face-to-face with customers compared with 2020.

Other distribution. Certaindistribution. While some of ourthe Company's other distribution channels market health products, although their main emphasis is on life insurance. On a combined basis, they accounted for 17%16% of health premium in the 2017 period.2021 and 2020. The American Income Exclusive AgencyLife Division primarily markets accident plans. The Direct Response unitto Consumer Division markets primarily Medicare Supplements to employer or union-sponsored groups. The Direct Responseto Consumer Division added $4$1 million of Medicare Supplement net sales in 2017.as of March 31, 2021 and 2020. 
Annuities.
ANNUITIES

Annuities represent an insignificant part of our businessbusiness. We do not currently market stand-alone fixed or deferred annuity products, favoring instead protection-oriented life and are not expected to be an important part of our marketing strategy going forward.supplemental health insurance products.

Operating expenses, comparing the first nine months of 2017 with the first nine months of 2016. Operating expenses consist of insurance administrative expenses and Parent Company expenses. Also included is stock compensation expense, which is viewed by us as Parent Company expense. Insurance administrative expenses relate to premium income for a given period; therefore, we measure those expenses as a percentage of premium income. Total expenses are measured as a percentage of total revenues. An analysis of operating expenses is shown below.


44
Operating Expenses Selected InformationGL Q1 2021 FORM 10-Q
(Dollar amounts in thousands)
 Nine Months Ended September 30,
 2017 2016

Amount % of
Premium		 Amount % of
Premium
Insurance administrative expenses:       
Salaries$70,505
 2.9 $67,683
 2.9
Other employee costs25,320
 1.0 21,834
 0.9
Information technology costs19,325
 0.8 17,712
 0.7
Legal costs6,520
 0.2 6,352
 0.3
Other administrative costs34,081
 1.4 32,548
 1.4
Total insurance administrative expenses155,751
 6.3 146,129
 6.2
        
Parent company expense7,228
   6,360
  
Stock compensation expense24,809
   20,334
  
Non-operating fees—
   257
  
Total operating expenses, per Condensed Consolidated Statements of Operations
$187,788
   $173,080
  
        
Insurance administrative expenses:       
Increase (decrease) over prior year6.6%   5.4%  
Total operating expenses:       
Increase (decrease) over prior year8.5%   3.6%  
Insurance administrative expenses of $156 million were up 6.6% in 2017 when compared with the prior year period of $146 million. As a percentage of total premium, insurance administrative expenses were 6.3% in 2017 compared with 6.2% in 2016. The increase in other employee costs was due primarily to higher pension expense driven by lower interest rates. The increase in information technology costs was due to investments that will enhance our customer

36
Table of Contents

Globe Life Inc.

Management's Discussion & Analysis



INVESTMENTS
experience, improve our data analytics capabilities, improve our ability to react quickly to future changes and bolster our information security programs.
The increase in stock compensation expense was primarily due to higher expense associated with equity awards, reflecting Torchmark's higher share price as compared with the same period a year ago.
Investments (excess investment income), comparing the first nine months of 2017 with the first nine months of 2016.We manage our capital resources including investments, debt, and cash flow through the investment segment. Excess investment income represents the profit margin attributable to investment operations. Itoperations and is the measure that we use to evaluate the performance of the investment segment as described in Note 10—9—Business Segments.Segments. It is defined as net investment income less both the required interest on net insurance policy liabilities and the interest cost associated with capital funding or “financing costs.”
We
Management also viewviews excess investment income per diluted common share as an important and useful measure to evaluate the performance of the investment segment. It is defined as excess investment income divided by the total diluted weighted average shares outstanding, representing the contribution by the investment segment to the consolidated earnings per share of the Company. Since implementing our share repurchase program in 1986, we have used $7.0$8.3 billion of excess cash flow at the Parent Company to repurchase TorchmarkGlobe Life Inc. common shares (average split-adjusted price per diluted common share of $15.90) after determining that the repurchases provided a greater risk adjusted after-tax return than other investment alternatives. Share repurchases reduceIf we had not used this excess cash to repurchase shares, but had instead invested it in interest-bearing assets, we would have earned more investment income and had more shares outstanding. As excess investment income because of the foregone earnings on the cash that would otherwise have been invested in interest-bearing assets, but they also reduce the number of shares outstanding. In order to putper diluted common share incorporates all capital resource uses on a comparable basis,resources, we believe thatview excess investment income per diluted share is an appropriateas a useful measure ofto evaluate the investment segment.

Excess Investment Income.The following table summarizes Torchmark’sGlobe Life's investment income, excess investment income, and excess investment income per diluted common share.

Analysis of Excess Investment Income
(Dollar amounts in thousands)thousands, except for per share data)
Three Months Ended
March 31,		Change
20212020Amount%
Net investment income$235,820 $228,991 $6,829 3 
Interest on net insurance policy liabilities:
Interest on reserves(214,925)(204,171)(10,754)5 
Interest on deferred acquisition costs60,827 58,725 2,102 4 
Net required interest(154,098)(145,446)(8,652)6 
Financing costs(21,178)(20,808)(370)2 
Excess investment income
$60,544 $62,737 $(2,193)(3)
Excess investment income per diluted share
$0.58 $0.57 $0.01 2 
Mean invested assets (at amortized cost)$18,646,061 $17,472,498 $1,173,563 7 
Average net insurance policy liabilities(1)
10,775,618 10,277,692 497,926 5 
Average debt and preferred securities (at amortized cost)1,939,394 1,720,755 218,639 13 
 Nine Months Ended 
 September 30,		 Increase
(Decrease)
 2017 2016 Amount %
Net investment income$634,930
 $601,415
 $33,515
 6
Interest on net insurance policy liabilities:       
Interest on reserves(547,443) (524,093) (23,350) 4
Interest on deferred acquisition costs157,096
 151,546
 5,550
 4
Net required interest(390,347) (372,547) (17,800) 5
Financing costs(62,825) (62,860) 35
 —
Excess investment income$181,758
 $166,008
 $15,750
 9
        
Excess investment income per diluted share$1.52
 $1.35
 $0.17
 13
        
Average invested assets (at amortized cost)$15,275,412
 $14,339,950
 $935,462
 7
Average net insurance policy liabilities(1)
9,306,010
 8,896,284
 409,726
 5
Average debt and preferred securities (at amortized cost)1,471,616
 1,361,234
 110,382
 8
(1) Interest bearing policy liabilities, netNet of deferred acquisition costs, and excluding the attributedassociated unrealized gains and losses thereon.

Excess investment incomefor declined $2 million, or 3%, compared with the 2017 period increased9%to$182 million when compared to $166 million in the same period in 2016. The increase in excessyear-ago period. Excess investment income is primarily attributed to flat interest expense and an increase in net investment income due to the decline in the negative impact of delays of receiving Medicare Part D reimbursements. On a per diluted common share basis,increased 2% compared with the year-ago period. Excess investment income per diluted common share generally increases at a faster pace than excess investment income increased 13%, higher thanbecause the percentage increase in the dollar amountnumber of excess investment incomediluted shares outstanding generally decreases from year to year as a result of our share repurchase program.

Net investment income increased $34 for the three months ended March 31, 2021 was $236 million or 6% in 2017, below3% greater than the 7% increase in averageyear ago period. Mean invested assets (with fixed maturities at amortized cost)increased 7% during the first three months of 2021 over the same period last year. Net investment income has been negatively impacted

37
Table of Contents




during recent years by low interest rates on new investments and the turnover of higher-yielding assets in the portfolio. As such, growth in net investment income has been slower than the growth in mean invested assets in recent years. The effective annual yield rate earned on the fixed maturity portfolio was 5.68%5.24% in the first ninethree months of 2017,2021, compared with 5.80%5.39% a year earlier. The decreaseGrowth in net investment income has been negatively impacted in recent years by the overalllow interest rate environment during which time we have invested new money at yields lower than our average portfolio yield during recent periods is due primarily to investing at lower yield rates thanyield. In addition, we have reinvested the overall portfolio yield rates and reinvestingproceeds from bonds that matured, were called, or were otherwise disposed of at yield rates lowerless than disposition yield rates. what we earned on these bonds before their maturity or disposition.

45
GL Q1 2021 FORM 10-Q
Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

We currently expect that the average annual turnover rate of fixed maturity assets duringwill be less than 2% over the next five years will not exceed 1% to 2% of the portfolio and that this turnover will not have a material negative impact on net investment income.

Should the current low interest rate environment continue, the growth of the Company's net investment income will be negatively impacted primarily due to the investment of new money and proceeds from dispositions at rates less than the average portfolio yield rate. While net investment income would grow, it would continue to grow at rates less than the growth in mean invested assets. For 2021, we currently anticipate the average new money yield on our fixed maturity acquisitions to be approximately 10 basis points lower than the rate applicable to our 2020 acquisitions.

Should interest rates, rise, especially long-term rates, Torchmark'srise, Globe Life's net investment income would benefit due to higher interest rates on new purchases.investments. While such a rise in interest rates could adversely affect the fair value of the fixed maturities portfolio, we could withstand an increase in interest rates of approximately 90120 to 95125 basis points before the net unrealized gains on our fixed maturity portfolio as of September 30, 2017March 31, 2021 would be eliminated. Should interest rates increase further, than that, we would not be concerned with potential interest rate driven unrealized losses in our fixed maturity portfolio because we havedo not intend to sell, nor is it likely that management will be required to sell, the intent and, more importantly, the ability, to hold our fixed maturities prior to maturity.their anticipated recovery.

Required interest on net insurance policy liabilities reduces net investment income, sinceas it is the amount of net investment income considered by management necessary to “fund” required interest on net insurance policy liabilities, which is the net of the benefit reserve liability and the deferred acquisition cost asset. As such, it is removed from the investment segment and applied to the insurance segments to offset the effect of the required interest required byfrom the insurance segments. As discussed inNote 10—9—Business Segments,, management believesregards this providesas a more meaningful analysis of the investment and insurance segments. Required interest is based on the actuarial interest assumptions used to discountin discounting the benefit reserve liability and to amortize the amortization of deferred acquisition costs for our insurance policies in force.

The great majority of our life and health insurance policies are fixed interest-rateinterest rate protection policies, not investment products, and are accounted for under current GAAP accounting guidance for long-duration insurance products which mandatesmandate that interest rate assumptions for a particular block of business be “locked in” for the life of that block.block of business. Each calendar year, we set the discount rate to be used to calculate the benefit reserve liability and the amortization of the deferred acquisition cost asset for all insurance policies issued that year. That rate is based on the new money yields that we expect to earn on cash flow received in the future from policies of that issue year, and cannot be changed. The discount rate used for policies issued in the current year has no impact on the in force policies issued in prior years as the rates of all prior issue years are also locked in. As such, the overall discount rate for the entire in force block of 5.7% is a weighted average of the discount rates being used from all issue years. Changes in the overall weighted-average discount rate over time are caused by changes in the mix of the reserves and the deferred acquisition cost asset by issue year on the entire block of in force business. Business issued in the current year has very little impact on the overall weighted-average discount rate due to the size of our in force business.

Since actuarial discount rates are locked in for life on essentially all of our business, benefit reserves and deferred acquisition costs are not affected by interest rate fluctuations unless a loss recognition event occurs. Due to the strength of our underwriting margins, we do not expect an extended low interest rate environment will cause a loss recognition event.

Required interest on net insurance policy liabilities increased $18$9 million, or 5%6%, to $390$154 million, in linecompared with the 5% growth in average net interest-bearing insurance policy liabilities.


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Globe Life Inc.
Management's Discussion & Analysis

Financing costs for the investment segment consist primarily of interest on our various debt were flat ininstruments. The table below presents the first nine monthscomponents of 2017 at $63 million.financing costs and reconciles interest expense per the Condensed Consolidated Statements of Operations.
More information concerning debt can be found in the Capital Resources section of this report.
Analysis of Financing Costs
(Dollar amounts in thousands)
Three Months Ended
March 31,		Increase
(Decrease)
20212020Amount%
Interest on funded debt$19,746 $17,491 $2,255 13 
Interest on term loans— 644 (644)(100)
Interest on short-term debt1,432 2,673 (1,241)(46)
Financing costs
$21,178 $20,808 $370 2 


In 2021, financing costs increased 2% primarily due to the 2.15% Senior Notes issued in the third quarter of 2020. For the full year 2021 versus 2020, Globe Life anticipates financing costs to decrease as a result of lower cost of short-term debt. More information on our debt transactions is disclosed in the Financial Condition section of this report.

Realized Gains and Losses.Our core business of providing insurance coverage requires us to maintain a large and diverse investment portfolio to support our insurance liabilities. From time to time, investments are sold or called, or experience a credit loss event, each of which results in a realized gain or loss. The Company also elects to measure its investment in certain limited partnerships at fair value in accordance with the fair value option for financial instruments with changes recognized in Realized gains (losses) in the Condensed Consolidated Statements of Operations.
 Nine Months Ended 
 September 30,		 Increase
(Decrease)
 2017 2016 Amount %
Interest on funded debt$55,089
 $57,647
 $(2,558) (4)
Interest on term loan1,706
 536
 1,170
 *
Interest on short term debt6,026
 4,674
 1,352
 29
Other4
 3
 1
 33
Financing costs$62,825
 $62,860
 $(35) —

*Percent change isRealized gains and losses can be significant in relation to the earnings from core insurance operations, and as a result, can have a material positive or negative impact on net income. The significant fluctuations caused by gains and losses can cause period-to-period trends of net income that are not meaningful.indicative of historical core operating results or predicative of the future trends of core operations. Accordingly, they have no bearing on core insurance operations or segment results as we view operations. For these reasons, and in line with industry practice, we remove the effects of realized gains and losses when evaluating overall insurance operating results. The following table summarizes our tax-effected realized gains (losses) by component.



Analysis of Realized Gains (Losses), Net of Tax
(Dollar amounts in thousands, except for per share data)
 Three Months Ended March 31,
 20212020
 AmountPer ShareAmountPer Share
Fixed maturities:
Sales$(8,599)$(0.08)$2,087 $0.02 
Matured or other redemptions(1)
20,800 0.20 1,811 0.02 
Provision for credit losses2,643 0.02 (25,165)(0.23)
Fair value option—change in fair value7,809 0.07 461 — 
Other(413)— 189 — 
Total realized gains (losses)$22,240 $0.21 $(20,617)$(0.19)
(1)During the three months ended March 31, 2021 and 2020, the Company recorded $85.8 million and $5.9 million of exchanges of fixed maturity securities (noncash transactions) that resulted in $19.9 million and $0, respectively in realized gains, net of tax.

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Table of Contents

Globe Life Inc.

Management's Discussion & Analysis




Investments (acquisitions), comparing the first nine months of 2017 with the first nine months of 2016. Torchmark’s
Investment Acquisitions. Globe Life's investment policy calls for investing primarily in investment grade fixed maturities that meet our quality and yield objectives. We generally prefer to invest in securities with longer maturities because they more closely match the long-term nature of our policy liabilities. We believe this strategy is appropriate becausesince our expected future cash flows from operationsare generally stable and predictable and the likelihood that we will need to sell invested assets are positive, stable and predictable.to raise cash is low. If longer-term securities that meet our quality and yield objectives are not available, we do not relaxcompromise on our quality objectives, butobjectives; instead, we consider investing in shortershorter-term or lower yieldinglower-yielding securities taking into consideration the slope of the yield curve and other factors.factors such as risk adjusted capital adjusted returns.

The following table summarizes selected information for fixed maturity purchases.investments. The effective annual yield shown is based on the yield calculated toacquisition price and call features, if any, of the “worst call date.”securities. For non-callable bonds, the worst-call dateyield is always thecalculated to maturity date. For callable bonds the worst-call date is the call date that produces the lowest yield (or the maturity date, ifacquired at a premium, the yield is calculated to the maturityearliest known call date is lower thanand call price after acquisition ("first call date"). For all other callable bonds, the yield is calculated to each call date).maturity date.



Fixed Maturity Acquisitions Selected Information
(Dollar amounts in thousands)
Three Months Ended
March 31,
 20212020
Cost of acquisitions:
Investment-grade corporate securities$260,002 $85,409 
Investment-grade municipal securities33,228 117,601 
Other investment-grade securities5,619 8,744 
Total fixed maturity acquisitions(1)
$298,849 $211,754 
Effective annual yield (one year compounded)(2)
3.41 %3.81 %
Average life (in years, to next call)29.6 14.9 
Average life (in years, to maturity)33.7 27.0 
Average ratingAA+
 Nine Months Ended 
 September 30,
 2017 2016
Cost of acquisitions(1):

 
Corporate securities$1,046,773
 $910,085
Other5,932
 15,737
Total fixed maturity acquisitions$1,052,705
 $925,822
    
Effective annual yield(2)
4.74% 4.73%
Average life (in years, to next call)22.8
 24.1
Average life (in years, to maturity)23.7
 24.8
Average ratingBBB+
 BBB+

(1) Total fixedFixed maturity acquisitions includeincluded unsettled trades of $10.0$3 million in 20172021 and $15.7 million$0 in 2016.2020.
(2)Tax-equivalent basis, where the yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.

For investments in callable bonds, the actual life of the investment will depend on whether the issuer calls the investment prior to the maturity date. Given our investments in callable bonds, the actual average life of our investments cannot be known at the time of the investment. Absent sales and "make-whole calls", however, the average life will not be less than the average life to next call and will not exceed the average life to maturity. Data for both of these average life measures is provided in the above chart.

Acquisitions in both periods consisted primarily of corporate and government bonds with securities spanning a diversified range of issuers, industry sectors, and geographical regions. AllIn the first three months of 2021, we invested primarily in the industrial and financial sectors. For the entire portfolio, the taxable equivalent effective yield earned was 5.24%, down approximately 15 basis points from the yield in the first three months of 2020. As previously noted in the discussion of net investment income, the decrease was primarily due to the combination of lower interest rates applicable to new purchases and securities called during 2020. For the remainder of 2021, the Company will continue to execute on its existing strategy by seeking to invest in assets that satisfy our quality and other objectives, while maximizing the highest risk adjusted capital adjusted return.



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Table of Contents
Globe Life Inc.
Management's Discussion & Analysis

In 2017, it was announced by the head of the acquired securities were investment grade.United Kingdom's Financial Conduct Authority of its plan to phase out the floating rate, London Interbank Offered Rate (LIBOR). The rate will transition out from 2021 to mid-year 2023. As of March 31, 2021, the Company had limited assets and liabilities that utilize LIBOR as a benchmark rate. We will continue to monitor the progress toward the establishment of a new floating rate.
Investments (portfolio composition). The composition of the investment portfolio at book value on September 30, 2017 was as follows:
Invested Assets at September 30, 2017
(Dollar amounts in thousands)

Amount
% of
Total
Fixed maturities (at amortized cost)$14,914,580
 96
Policy loans523,318
 3
Other long-term investments(1)
69,592
 1
Short-term investments65,482
 —
Total$15,572,972
 100
(1) Includes equities available for sale at amortized cost.
Approximately 96% of our investments at book value are in a diversified fixed-maturity portfolio, the same percentage as at year end. Policy loans, which are secured by policy cash values, make up approximately 3% of our investments. We also have insignificant investments in equity securities and other long-term investments. BecauseSince fixed maturities represent such a significant portion of our investment portfolio, the remainder of the discussion of portfolio composition will focus on fixed maturities. See a breakdown of the Company's Other long-term investments in Note 4—Investments.


Selected information concerning the fixed maturity portfolio is as follows:

Fixed Maturity Portfolio Selected Information
At
March 31,
2021		December 31, 2020March 31,
2020
Average annual effective yield(1)
5.24%5.28%5.39%
Average life, in years, to:
Next call(2)
16.216.216.7
Maturity(2)
19.019.019.2
Effective duration to:
Next call(2,3)
10.611.010.6
Maturity(2,3)
11.912.311.6
(1)Tax-equivalent basis. The yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.
(2)Globe Life calculates the average life and duration of the fixed maturity portfolio two ways:
(a) based on the next call date which is the next call date for callable bonds and the maturity date for noncallable bonds, and
(b) based on the maturity date of all bonds, whether callable or not.
(3)Effective duration is a measure of the price sensitivity of a fixed-income security to a particular change in interest rates.

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Table of Contents

Globe Life Inc.

Management's Discussion & Analysis



Fixed Maturities.Credit Risk Sensitivity. The following table summarizestables summarize certain information about the major corporate sectors and security types held in our fixed maturity portfolio at September 30, 2017.March 31, 2021 and December 31, 2020.


Fixed Maturities by Sector
At September 30, 2017March 31, 2021
(Dollar amounts in thousands)
Below Investment GradeTotal Fixed Maturities% of Total Fixed Maturities
 Amortized
Cost, net		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value		Amortized
Cost, net		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value		At Amortized Cost, netAt Fair Value
Corporates:
Financial
Insurance - life, health, P&C$57,612 $4,076 $(8,484)$53,204 $2,271,939 $410,461 $(11,885)$2,670,515 13 13 
Banks27,005 422 — 27,427 969,244 169,848 (4,044)1,135,048 6 6 
Other financial114,935 17 (5,872)109,080 1,216,893 139,185 (11,737)1,344,341 7 7 
Total financial199,552 4,515 (14,356)189,711 4,458,076 719,494 (27,666)5,149,904 26 26 
Utilities
Electric50,079 5,135 (297)54,917 1,415,221 337,625 (763)1,752,083 8 9 
Gas and water— — — — 561,650 87,510 (1,538)647,622 3 3 
Total utilities50,079 5,135 (297)54,917 1,976,871 425,135 (2,301)2,399,705 11 12 
Industrial - Energy
Pipelines85,302 2,009 (2,782)84,529 921,637 144,321 (3,305)1,062,653 5 5 
Exploration and production100,712 10,316 (542)110,486 576,633 82,332 (6,511)652,454 4 3 
Oil field services— — — — 49,794 11,160 — 60,954 — — 
Refiner— — — — 89,288 20,167 — 109,455 1 1 
Driller— — — — — — — — — — 
Total energy186,014 12,325 (3,324)195,015 1,637,352 257,980 (9,816)1,885,516 10 9 
Industrial - Basic materials
Chemicals— — — — 669,487 99,334 (1,875)766,946 4 4 
Metals and mining— — — — 406,445 105,609 — 512,054 2 2 
Forestry products and paper— — — — 88,681 15,792 — 104,473 1 1 
Total basic materials— — — — 1,164,613 220,735 (1,875)1,383,473 7 7 
Industrial - Consumer, non-cyclical84,358 6,887 (2,173)89,072 2,215,755 356,403 (4,168)2,567,990 13 13 
Other industrials25,638 3,344 — 28,982 1,268,921 223,307 (2,628)1,489,600 7 7 
Industrial - Transportation25,659 3,951 (120)29,490 567,389 117,883 (150)685,122 3 3 
Other corporate sectors179,727 18,328 (3,634)194,421 1,612,317 218,475 (15,932)1,814,860 9 9 
Total corporates751,027 54,485 (23,904)781,608 14,901,294 2,539,412 (64,536)17,376,170 86 86 
Other fixed maturities:
Government (U.S., municipal, and foreign)— — — — 2,339,237 254,974 (12,268)2,581,943 13 13 
Collateralized debt obligations36,810 24,491 — 61,301 36,810 24,491 — 61,301 — — 
Other asset-backed securities13,875 — (2,299)11,576 134,273 4,459 (3,623)135,109 1 1 
Mortgage-backed securities(1)
— — — — 345 42 — 387 — — 
Total fixed maturities$801,712 $78,976 $(26,203)$854,485 $17,411,959 $2,823,378 $(80,427)$20,154,910 100 100 
 
Below Investment Grade Total Fixed Maturities % of Total Fixed Maturities
  Cost or
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value		 Cost or
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value		 At Amortized CostAt Fair Value
 
 Corporates:            
 Financial            
 Insurance - life, health, P&C$58,294
$2,842
$(3,381)$57,755
 $2,003,179
$319,173
$(4,544)$2,317,808
 1314
 Banks31,035
624
(3,030)28,629
 739,517
107,348
(3,191)843,674
 55
 Other financial74,955
—
(19,204)55,751
 793,595
59,983
(21,175)832,403
 55
 Total financial164,284
3,466
(25,615)142,135
 3,536,291
486,504
(28,910)3,993,885
 2324
 Utilities            
 Electric20,713
1,239
—
21,952
 1,469,534
275,245
(2,332)1,742,447
 1011
 Gas and water—
—
—
—
 507,550
51,148
(439)558,259
 33
 Total utilities20,713
1,239
—
21,952
 1,977,084
326,393
(2,771)2,300,706
 1314
 Industrial - Energy            
 Pipelines40,598
531
(2,250)38,879
 865,245
100,340
(5,289)960,296
 66
 Exploration and production28,918
777
—
29,695
 531,485
61,007
(4,023)588,469
 44
 Oil field services33,871
—
(4,568)29,303
 83,730
9,127
(4,568)88,289
 11
 Refiner—
—
—
—
 67,012
14,611
(5)81,618
 ——
 Driller54,582
211
(14,185)40,608
 54,582
211
(14,185)40,608
 ——
 Total energy157,969
1,519
(21,003)138,485
 1,602,054
185,296
(28,070)1,759,280
 1111
 Industrial - Basic materials            
 Chemicals—
—
—
—
 541,902
45,379
(497)586,784
 44
 Metals and mining68,073
7,831
—
75,904
 390,213
74,145
—
464,358
 33
 Forestry products and paper—
—
—
—
 112,311
15,338
—
127,649
 11
 Total basic materials68,073
7,831
—
75,904
 1,044,426
134,862
(497)1,178,791
 88
 Industrial - Consumer, non-cyclical—
—
—
—
 1,770,933
168,731
(7,462)1,932,202
 1111
 Other industrials47,204
2,792
(29)49,967
 1,357,486
164,785
(2,430)1,519,841
 99
 Industrial -
Transportation		26,572
387
(246)26,713
 551,533
77,257
(614)628,176
 44
 Other corporate sectors116,459
4,920
(5,094)116,285
 1,300,884
120,485
(11,667)1,409,702
 98
 Total corporates601,274
22,154
(51,987)571,441
 13,140,691
1,664,313
(82,421)14,722,583
 8889
 Other fixed maturities:            
 Government (U.S., municipal, and foreign)306
—
(36)270
 1,568,390
142,000
(1,205)1,709,185
 1110
 Collateralized debt obligations59,204
19,558
(8,994)69,768
 59,204
19,558
(8,994)69,768
 ——
 Other asset-backed securities—
—
—
—
 144,701
4,967
(17)149,651
 11
 
Mortgage-backed securities(1)
—
—
—
—
 1,594
133
(1)1,726
 ——
 Total fixed maturities$660,784
$41,712
$(61,017)$641,479
 $14,914,580
$1,830,971
$(92,638)$16,652,913
 100100
(1)Includes Government National Mortgage Association (GNMA).
(1) Includes GNMA's.




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Globe Life Inc.

Management's Discussion & Analysis



Fixed Maturities by Sector
At September 30, 2017, fixed maturities had a fair value of $16.7 billion, compared with $15.2 billion at December 31, 2016. The net unrealized gain position2020
(Dollar amounts in the fixed-maturity portfolio increased from $1.1 billion at December 31, 2016 to $1.7 billion at September 30, 2017. The September 30, 2017 net unrealized gain consistedthousands)
Below Investment GradeTotal Fixed Maturities% of Total Fixed Maturities
 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value		Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value		At Amortized CostAt Fair Value
Corporates:
Financial
Insurance - life, health, P&C$57,658 $3,894 $(10,788)$50,764 $2,275,843 $563,349 $(14,769)$2,824,423 13 13 
Banks27,014 15 (456)26,573 993,946 259,489 (1,050)1,252,385 6 6 
Other financial114,919 271 (8,245)106,945 1,134,414 193,975 (8,402)1,319,987 7 6 
Total financial199,591 4,180 (19,489)184,282 4,404,203 1,016,813 (24,221)5,396,795 26 25 
Utilities
Electric50,663 6,289 — 56,952 1,438,796 476,744 (108)1,915,432 9 9 
Gas and water— — — — 536,664 131,851 — 668,515 3 3 
Total utilities50,663 6,289 — 56,952 1,975,460 608,595 (108)2,583,947 12 12 
Industrial - Energy
Pipelines85,327 1,624 (2,309)84,642 923,756 187,851 (2,423)1,109,184 5 5 
Exploration and production104,719 5,980 (678)110,021 555,796 121,940 (678)677,058 3 3 
Oil field services— — — — 49,799 13,613 — 63,412 — — 
Refiner— — — — 89,371 22,793 — 112,164 1 1 
Driller1,902 — 18 1,920 1,902 — 18 1,920 — — 
Total energy191,948 7,604 (2,969)196,583 1,620,624 346,197 (3,083)1,963,738 9 9 
Industrial - Basic materials
Chemicals— — — — 642,258 152,016 — 794,274 4 4 
Metals and mining— — — — 406,564 144,110 — 550,674 2 3 
Forestry products and paper— — — — 88,804 21,588 — 110,392 1 1 
Total basic materials— — — — 1,137,626 317,714 — 1,455,340 7 8 
Industrial - Consumer, non-cyclical96,265 8,680 (1,903)103,042 2,233,324 576,007 (2,070)2,807,261 13 13 
Other industrials25,661 3,925 — 29,586 1,260,646 328,986 (6)1,589,626 7 7 
Industrial - Transportation25,777 4,315 — 30,092 566,935 175,405 — 742,340 3 3 
Other corporate sectors179,878 17,459 (3,595)193,742 1,489,113 329,254 (4,142)1,814,225 9 9 
Total corporates769,783 52,452 (27,956)794,279 14,687,931 3,698,971 (33,630)18,353,272 86 86 
Other fixed maturities:
Government (U.S., municipal, and foreign)— — — — 2,313,855 341,176 (1,256)2,653,775 13 13 
Collateralized debt obligations57,007 23,460 (8,869)71,598 57,007 23,460 (8,869)71,598 — — 
Other asset-backed securities13,949 — (2,727)11,222 134,616 3,591 (3,778)134,429 1 1 
Mortgage-backed securities(1)
— — — — 390 45 — 435 — — 
Total fixed maturities$840,739 $75,912 $(39,552)$877,099 $17,193,799 $4,067,243 $(47,533)$21,213,509 100 100 
(1)Includes GNMAs.



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Table of gross unrealized gains of $1.8 billion offset by $93 million of gross unrealized losses, compared with the December 31, 2016 net unrealized gain which consisted of a gross unrealized gain of $1.3 billion and a gross unrealized loss of $216 million.Contents
Globe Life Inc.
Management's Discussion & Analysis

Corporate securities, which consist of bonds and redeemable preferred stocks, were the largest component of the March 31, 2021 fixed maturity portfolio, representing 88%86% of both amortized cost, net and 89% of fair value. The remainder of the portfolio is invested primarily in securities issued by the U.S. government and U.S. municipalities. The Company holds insignificant amounts in foreign government bonds, collateralized debt obligations, asset-backed securities, and agency mortgage-backed securities. Corporate securities are diversified over a variety of industry sectors and issuers;issuers. At March 31, 2021, the total fixed maturity portfolio consisted of 600781 issuers.

At March 31, 2021, fixed maturities had a fair value of $20.2 billion, compared with $21.2 billion at December 31, 2020. The net unrealized gain ofposition in the fixed-maturity portfolio decreased from $4.0 billion at December 31, 2020 to $2.7 billion at March 31, 2021 due to an increase in market rates during the period.

For more information about our fixed maturity portfolio increased $681 million fromby component at March 31, 2021 and December 31, 2016.2020, including a discussion of allowance for credit losses, an analysis of unrealized investment losses and a schedule of maturities, see Note 4—Investments.

An analysis of the fixed maturity portfolio at September 30, 2017 by a composite quality rating at March 31, 2021 and December 31, 2020 is shown in the table below.following tables. The composite quality rating for each security, other than private-placement securities managed by third parties, is the average of the security’s ratings as assigned by Moody’s Investor Service, Standard & Poor’s, Fitch Ratings, and Dominion Bond Rating Service, LTD. The ratings assigned by these four nationally recognized statistical rating organizations are evenly weighted when calculating the average. The composite quality rating is created usingutilizing a methodology developed by Torchmark CorporationGlobe Life using ratings from the various rating agencies noted above (It should be noted that theabove. The composite quality rating is not a Standard & Poor's credit rating. Standard and& Poor's does not sponsor, endorse or promote the composite quality rating and shall not be liable for any use of the composite quality rating.) Included in the following chart below are private placement fixed maturity holdings of $593$600 million at amortized cost, net of allowance for credit losses ($615631 million at fair value). The for which the ratings for these holdings were assigned by the third party managers of those securities.third-party managers.


Fixed Maturities by Rating
At March 31, 2021
(Dollar amounts in thousands)
Amortized Cost, net% of TotalFair
Value		% of TotalAverage Composite Quality Rating on Amortized Cost, net
Investment grade:
AAA$743,505 4 $834,683 4 
AA1,745,884 10 1,868,577 9 
A4,443,827 25 5,344,601 27 
BBB+3,752,952 22 4,426,767 22 
BBB4,287,007 25 4,953,231 25 
BBB-1,637,072 9 1,872,566 9 
Total investment grade
16,610,247 95 19,300,425 96 A-
Below investment grade:
BB626,703 4 647,531 3 
B138,199 1 145,653 1 
Below B36,810 — 61,301 — 
Total below investment grade
801,712 5 854,485 4 BB-
$17,411,959 100 $20,154,910 100 
Weighted average composite quality rating
A-



 September 30, 2017

Amortized
Cost		 % Fair
Value		 %
Investment grade:       
AAA$647,007
 4 $681,920
 4
AA1,261,049
 9 1,418,391
 9
A4,023,931
 27 4,727,798
 28
BBB+3,493,852
 23 3,886,434
 23
BBB3,201,975
 22 3,531,015
 21
BBB-1,625,982
 11 1,765,876
 11
Investment grade14,253,796
 96 16,011,434
 96
Below investment grade:       
BB362,855
 2 351,691
 2
B161,422
 1 140,346
 1
Below B136,507
 1 149,442
 1
Below investment grade660,784
 4 641,479
 4

$14,914,580
 100 $16,652,913
 100
52
Of the $14.9 billion of fixed maturities at amortized cost as of September 30, 2017, $14.3 billion or 96% were investment grade with an average rating of A-. Below-investment-grade bonds were $661 million with an average rating of B+. Below-investment-grade bonds at amortized cost were 16% of our shareholders’ equity, excluding the effect of unrealized gains and losses on fixed maturities as of September 30, 2017. Overall, the total portfolio was rated BBB+ based on amortized cost, the same as at the end of 2016.GL Q1 2021 FORM 10-Q

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Globe Life Inc.

Management's Discussion & Analysis



Fixed Maturities by Rating
An analysis of the changes in our portfolio of below-investment-grade bonds at amortized cost during the first nine months of 2017 is as follows:
Below-Investment-Grade BondsAt December 31, 2020
(Dollar amounts in thousands)
Amortized
Cost
% of Total
Fair
Value
% of TotalAverage Composite Quality Rating on Amortized Cost
Investment grade:
AAA$713,053 4 $848,621 4 
AA1,657,270 10 1,873,323 9 
A4,566,999 26 5,969,677 28 
BBB+3,634,583 21 4,612,898 22 
BBB4,137,099 24 5,088,114 24 
BBB-1,644,056 10 1,943,777 9 
Total investment grade
16,353,060 95 20,336,410 96 A-
Below investment grade:
BB686,184 4 692,609 3 
B115,646 1 122,104 1 
Below B38,909 — 62,386 — 
Total below investment grade
840,739 5 877,099 4 BB-
$17,193,799 100 $21,213,509 100 
Weighted average composite quality rating
A-

The overall quality rating of the portfolio is A-, the same as year-end 2020. Fixed maturities rated BBB are 56% of the total portfolio at March 31, 2021, up from 55% at year-end 2020. While this ratio is high relative to our peers, we have limited exposure to higher-risk assets such as derivatives, equities, and asset-backed securities. Additionally, the Company does not participate in securities lending, and has no off-balance sheet investments as of March 31, 2021. BBB securities provide the Company with the best risk adjusted capital adjusted returns, largely due to our unique ability to hold securities to maturity regardless of fluctuations in interest rates or equity markets.

An analysis of changes in our portfolio of below-investment grade fixed maturities at amortized cost, net of allowance for credit losses is as follows:
Balance as of December 31, 2016$751,144
Downgrades by rating agencies—
Upgrades by rating agencies(76,659)
Disposals(16,422)
Amortization and other2,721
Balance as of September 30, 2017$660,784


Below-Investment Grade Fixed Maturities
As noted earlier, our(Dollar amounts in thousands)
Three Months Ended
March 31,
20212020
Balance at beginning of period
$840,739 $674,155 
Downgrades by rating agencies— 102,488 
Upgrades by rating agencies— — 
Dispositions(43,141)(5,398)
Provision for credit losses3,346 (31,854)
Amortization and other768 818 
Balance at end of period
$801,712 $740,209 

Our investment policy calls for investing primarily in fixed maturities that are investment grade and meet our quality and yield objectives. Thus, any increases in below-investment-gradebelow-investment grade issues are typically a result of ratings downgrades of existing holdings. Our investment portfolio does not contain counterparty risks as we are not a party to any derivatives contracts. We also do not participate in securities lending and we have no off-balance sheet investments.
Additional information concerning the fixed-maturity portfolio is as follows:
Fixed Maturity Portfolio Selected Information

September 30,
2017		 December 31, 2016 September 30,
2016
Average annual effective yield(1)
5.63% 5.74% 5.76%
Average life, in years, to:     
Next call(2)
17.4 17.6 17.6
Maturity(2)
19.2 19.8 19.9
Effective duration to:     
Next call(2)(3)
10.7 10.4 10.8
Maturity(2)(3)
11.4 11.3 11.6

(1) Tax-equivalent basis. The yield on tax-exempt securities is adjusted to produce a yield equivalent to the pretax yield on taxable securities.
(2) Torchmark calculates the average life and durationBelow-investment grade bonds at amortized cost, net of the fixed maturity portfolio two ways: (a) based on the next call date which is the next call dateallowance for callable bonds and the maturity date for noncallable bonds, and (b) based on the maturity date of all bonds, whether callable or not.
(3) Effective duration is a measure of the price sensitivity of a fixed-income security to a particular change in interest rates.
Realized Gains and Losses, comparing the first nine months of 2017 with the first nine months of 2016. As discussed in Note 10—Business Segments, our core business of providing insurance coverage requires us to maintain a large and diverse investment portfolio to support our insurance liabilities. From time to time, investments are disposed of or written down prior to maturity, resulting in realized gains or losses. Because these dispositions and write-downs are outside the coursecredit losses, were 14% of our normal operations, management removesshareholders’ equity, excluding the effectseffect of suchunrealized gains and losses when evaluating its overall core operating results.

on fixed maturities
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Globe Life Inc.

Management's Discussion & Analysis



as of March 31, 2021. Globe Life invests long term and as such, one of our key criterion in our investment process is to select issuers that have the ability to weather multiple financial cycles.

OPERATING EXPENSES

Operating expenses are included in the "Corporate and Other" segment and are classified into two categories: insurance administrative expenses and expenses of the Parent Company. Insurance administrative expenses generally include expenses incurred after a policy has been issued. As these expenses relate to premium for a given period, management measures the expenses as a percentage of premium income. The Company also views stock-based compensation expense as a Parent Company expense. Expenses associated with the issuance of our insurance policies are reflected as acquisition expenses and included in the determination of underwriting margin.

An analysis of operating expenses is shown below.

Operating Expenses Selected Information
(Dollar amounts in thousands)

 Three Months Ended March 31,Increase
 20212020(Decrease)
Amount% of
Premium		Amount% of
Premium		Amount%
Insurance administrative expenses:
Salaries$28,180 2.8 $26,179 2.8 $2,001 8 
Other employee costs11,447 1.2 11,261 1.2 186 2 
Information technology costs11,404 1.1 11,216 1.2 188 2 
Legal costs2,833 0.3 2,715 0.3 118 4 
Other administrative costs12,312 1.2 12,249 1.3 63 1 
Total insurance administrative expenses66,176 6.6 63,620 6.8 2,556 4 
Parent company expense2,318 2,331 (13)
Stock compensation expense7,888 9,356 (1,468)
Legal proceedings4,828 3,275 1,553 
$81,210 $78,582 $2,628 3 


Total operating expenses increased 3% over the prior year period primarily due to a 4% increase in insurance administrative expenses. Insurance administrative expenses increased primarily due to higher employee-related expenses, including pension costs and information technology salaries. Pension expense increased due to the lower discount rate used to determine net periodic benefit costs in 2021 as compared to 2020. The decrease in stock-based compensation expense was primarily due to fewer performance based equity awards applicable to the first quarter of 2021 as compared to the same period in 2020. While insurance administrative expenses were up 4%, they were down as a percentage of premium at 6.6%, compared with 6.8% for the same period in 2020.


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Globe Life Inc.
Management's Discussion & Analysis


SHARE REPURCHASES

Globe Life has an ongoing share repurchase program that began in 1986, and is reviewed quarterly by management and annually reaffirmed by the Board of Directors. With no specified authorization amount, we determine the amount of repurchases based on the amount of the excess cash flow at the Parent Company, general market conditions, and other alternative uses. The majority of these purchases are made from excess cash flow. Excess cash flow at the Parent Company is primarily comprised of dividends received from the insurance subsidiaries less interest expense paid on its debt, dividends paid to Parent Company shareholders, and other limited operating activities. Additionally, when stock options are exercised, proceeds from these exercises and the resulting tax benefit are used to repurchase additional shares on the open market to minimize dilution as a result of the option exercises. The Board of Directors has authorized the Parent Company’s share repurchase program in amounts and with timing that management, in consultation with the Board, determines to be in the best interest of the Company and its shareholders.
The following tablechart summarizes our tax-effected realized gains (losses) by component.share repurchases for the three month periods ended March 31, 2021 and 2020.

Analysis of Realized Gains (Losses), Net of TaxShare Repurchases
(Dollar amountsAmounts in thousands, except per share data)
 Three Months Ended March 31,
 20212020
 SharesAmountAverage
Price		SharesAmountAverage
Price
Purchases with:
Excess cash flow at the Parent Company944 $90,149 $95.47 1,629 $139,254 $85.47 
Option exercise proceeds435 42,571 97.89 267 27,475 103.13 
Total1,379 $132,720 $96.23 1,896 $166,729 $87.95 
Throughout the remainder of this discussion, share repurchases will only refer to those made from excess cash flow at the Parent Company.

FINANCIAL CONDITION
 
 Nine Months Ended September 30,
 2017 2016
 Amount Per Share Amount Per Share
Fixed maturities:       
Investment sales$3,153
 $0.02
 $3,847
 $0.03
Investments called or tendered5,628
 0.05
 995
 0.01
Investment writedowns (1)
(159) —
 —
 —
Other investments(2,387) (0.02) 215
 —
Total$6,235
 $0.05
 $5,057
 $0.04

(1) Written down due to other-than-temporary impairment.
(1) Written down due to other-than-temporary impairment

Financial Condition
Liquidity. Liquidity. Liquidity provides TorchmarkGlobe Life with the ability to meet on demand the cash commitments required to support our business operations and meet our financial obligations. Our liquidity is evidenced by consistentprimarily derived from three sources: positive cash flow from operations, a portfolio of marketable investments,securities, and oura line of credit facility.

Insurance subsidiary liquiditySubsidiary Liquidity.The operations of our insurance subsidiaries have historically generated substantial cash inflows in excess of immediate cash needs. Sources of cash flowsCash inflows for the insurance subsidiaries primarily include primarily premium and investment income. In addition to investment income, maturities and scheduled repayments in the investment portfolio are cash inflows. Cash outflows from operations include policy benefit payments, commissions, administrative expenses, and taxes. The funds toA portion of the excess cash inflows in the current year will provide for the payment of future policy benefits, the majority of which are paid in future periods,and are invested primarily in long-term fixed maturities as they better match the long-term nature of these obligations. In addition to investment income, maturities and scheduled repayments in the investment portfolio are sources of cash. Excess cash available from the insurance subsidiaries’ operations is generally distributed as a dividend to the parent company,Parent Company, subject to regulatory restriction.restrictions. The dividends are generally paid in amounts equal to the subsidiaries’ prior year statutory net income excluding realized capital gains. While the leading source of the excess cash is investment income, due to our high underwriting margins and effective expense control, a significant portion of the excess cash also comes from underwriting income.income due to our high underwriting margins and effective expense control. While the insurance subsidiaries routinely generate more operating cash inflows than cash outflows annually, the companies also have the entire available-for-sale fixed maturity investment portfolio available to create additional cash flows if required.

Parent Company liquidity.Liquidity. An important source of Parent Company liquidity is the dividends from theits insurance subsidiaries noted above.subsidiaries. These dividends are received throughout the year and are used by the Parent Company to pay dividends on common and preferred stock, interest and principal repayment requirements on Parent Company debt, and operating expenses of the Parent Company. In the first nine months

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Table of 2017, the Parent Company received $309 million of cash dividends from subsidiaries, compared with $273 million in 2016. The increase in cash dividends received from subsidiaries was primarily due to the timing of dividend payments. For the full year 2017, cash dividends from subsidiaries are expected to total approximately $452 million.Contents
Globe Life Inc.
Management's Discussion & Analysis


Three Months Ended
March 31,		Twelve Months Ended December 31,
20212020Projected 20212020
Liquidity Sources:
Dividends from Subsidiaries$120,728 $219,709 $480,000 $485,871 
Excess Cash Flows88,922 189,171 365,000 387,606 

Additional sources of liquidity for the Parent Company are cash, intercompany receivables, intercompany borrowings, public debt markets, term loans, and a credit facility. At September 30, 2017,March 31, 2021, the Parent Company had $55access to $270 million of invested cash, and net intercompany receivables.receivables and other liquid assets. The credit facility is discussed below.


Credit Facility. We have
Short-Term Borrowings. An additional source of Parent Company liquidity is a credit facility with a group of lenders allowing for unsecured revolving borrowings and stand-by letters of credit up to $750 million, which could be extended up to $1 billion. WeThe Parent Company may request the extension, however it is not guaranteed. Up to $250 million in letters of credit can be issued against the facility. The facility serves as a back-up credit line for a commercial paper program under which wecommercial paper may issue commercial paperbe issued at any time, with total commercial paper outstanding not to exceed the facility maximum, less any letters of credit issued. Interest charged on the commercial paper program is charged atresembles variable rates. This facility was amended in May 2016rate debt due to extend the maturity date of the facility to May 2021.its short term nature. The amendment also allowed for an additional $100 million term loan to be issued under the facility rate structure. The term loan was issued during 2016 andthree-year credit agreement will be repaid in quarterly escalating installments with a balloon payment of $75 million due in May 2021. Interestmature on the term loan is computed and paid

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monthly at 125 basis points plus 1 month LIBOR. In accordance with the agreement, we are subject to certain covenants regarding capitalization.August 24, 2023. As of September 30, 2017, we wereMarch 31, 2021, the Parent Company was in full compliance with those covenants.all covenants related to the aforementioned debt.

Commercial paper outstanding and any amortization payments of the term loan due within one year are included in short-term debt. The remaining balance of the term loan is included in long-term debt.

The following table presents certain information about our commercial paper borrowings.

Credit Facility - Facility—Commercial Paper
(Dollar amounts in thousands)
At
March 31,
2021		December 31, 2020March 31,
2020
Balance of commercial paper at end of period (par value)$275,000 $255,000 $450,000 
Annualized interest rate0.23 %0.27 %2.37 %
Letters of credit outstanding$135,000 $135,000 $150,000 
Remaining amount available under credit line340,000 360,000 150,000 
  At
  September 30, 
 2017		 December 31, 2016 September 30, 
 2016
Balance of commercial paper at end of period (par value) $305,800
 $262,850
 $266,000
Annualized interest rate 1.44% 0.96% 0.85%
Letters of credit outstanding $177,000
 $177,000
 $177,000
Remaining amount available under credit line 267,200
 310,150
 307,000

Credit Facility—Commercial Paper Activity
  Nine Months Ended 
 September 30,
  2017 2016
Average balance of commercial paper outstanding during period (par value) $336,664
 $297,065
Daily-weighted average interest rate (annualized) 1.24% 0.81%
Maximum daily amount outstanding during period (par value) $455,912
 $412,676
(Dollar amounts in thousands)
Our balance of
 Three Months Ended March 31,
 20212020
Average balance of commercial paper outstanding during period (par value)$300,444 $363,176 
Daily-weighted average interest rate (annualized)0.24 %1.96 %
Maximum daily amount outstanding during period (par value)$355,000 $470,000 

During the quarter, the Company increased the commercial paper outstanding at September 30, 2017 was $306borrowings by $20 million compared with $263 million atreflecting timing of cash needs of the previous year end.Parent Company. We have had no difficulties in accessing the commercial paper market under this facility during the nine month periodsthree months ended September 30, 2017March 31, 2021 and 2016.2020.
In summary, Torchmark
Globe Life expects to have readily available funds for 2021 and the foreseeable future to conduct its operations and to maintain target capital ratios in the insurance subsidiaries through internally generatedliquid assets currently available, internally-generated cash flow and the credit facility. In the unlikely event that more liquidity is needed, the Parent Company

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Management's Discussion & Analysis

could generate additional funds through multiple sources including, but not limited to, the issuance of debt, an additional short-term credit facility or term loan, and intercompany borrowing.

As of March 31, 2021, the Parent Company had access to $270 million of liquid assets. In addition to these liquid assets, the Parent Company is expected to generate additional excess cash flows during the remainder of 2021 in the range of $270 million to $280 million. Thus, the Parent Company is expected to have around $540 million to $550 million available during the remainder of the year. This liquidity is available to the Company in the event additional funds are needed to support the targeted capital levels within our insurance subsidiaries due to adverse impacts of COVID-19 and other contingencies.

Consolidated liquidity.Liquidity. Consolidated net cash inflows from continuing operations were $1 billion$372 million in the first ninethree months of 2017,2021, compared with $889$344 million in the same period of 2016.2020. The increase is primarily attributable to timing of cash disbursements and fluctuations in the settlement of certain amounts recordedincluded in other liabilities. In addition to cash inflows from operations, our insurance companies received proceeds from maturities, calls, and repaymentsdispositions of fixed maturities available for sale in the amount of $306$37 million during the 20172021 period. As previously noted under the caption Credit Facility we have, the Parent Company has in place a line of credit facility. The insurance companies have no additional outstanding credit facilities.

Cash and short-term investments were $154$175 million at September 30, 2017,March 31, 2021, compared with $148$203 million at December 31, 2016.2020. In addition to these liquid assets, the entire $16.7$20.2 billion (fair value at September 30, 2017)March 31, 2021) portfolio of fixed income securities is available for sale in the event of an unexpected need. Approximately 96%97% of our fixed income securities are publicly traded, freely tradable under SEC Rule 144, or qualified for resale under SEC Rule 144A. We generally expect to hold fixed income securities to maturity, and even though these securities are classified as available for sale, we have the ability and intent to hold any securities which are temporarily impaired until they mature.to recovery. Our strong cash flows from operations, on-going investment maturities, and credit line availability make any need to sell securities for liquidity highly unlikely.

Capital Resources. Management targets an aggregate capital ratio for its insurance subsidiaries of approximately 325% of Company action level regulatory capital under Risk-Based Capital (RBC), a formula designed by insurance regulatory authorities to monitor the adequacy of capital. Resources.The 325% target is considered sufficient for the subsidiaries because of their strong reliable cash flows, the relatively low risk of their product mix, and because that ratio is in line with rating agency expectations for Torchmark. At December 31, 2016, our insurance subsidiaries had an aggregate

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RBC ratio of approximately 324%. Should we experience impairments and/or ratings downgrades within our fixed maturity portfolio in the future, the ratio could fall below targeted levels. In such a case, management believes more than sufficient liquidity exists at the Parent Company to make additional contributions as necessary to maintain the targeted ratio.
On a consolidated basis, Torchmark’sCompany's capital structure consists of short-term debt (comprised of the(the commercial paper outstanding discussed above, current maturities of the term loan, and current maturities of funded debt)facility), long-term debt, (comprised of long-term maturities of funded debt and long term maturities of the term loan), and shareholders’ equity.


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Management's Discussion & Analysis


Long-Term Borrowings.The outstanding long-term debt at book value was $1.1$1.7 billion at September 30, 2017March 31, 2021 and December 31, 2016. An analysis of debt issues outstanding is as follows at September 30, 2017.2020.

Selected Information about Debt Issues
atSeptember 30, 2017As of March 31, 2021
(Dollar amounts in thousands)
InstrumentIssue DateMaturity DateCoupon Rate Interest Payment DatesPar
Value		Book
Value		Fair
Value
Senior notes05/27/199305/15/20237.875%semiannual$165,612 $165,018 $189,687 
Senior notes(1)
09/24/201209/15/20223.800%semiannual150,000 149,497 156,464 
Senior notes09/27/201809/15/20284.550%semiannual550,000 544,483 633,286 
Senior notes08/21/202008/15/20302.150%semiannual400,000 395,269 383,644 
Junior subordinated debentures05/17/201606/15/20566.125%quarterly300,000 290,670 306,000 
Junior subordinated debentures11/17/201711/17/20575.275%semiannual125,000 123,385 130,048 
Total long-term debt
1,690,612 1,668,322 1,799,129 
Commercial paper275,000 274,919 274,919 
Total short-term debt
275,000 274,919 274,919 
Total debt
$1,965,612 $1,943,241 $2,074,048 
InstrumentYear
Due		 Interest
Rate		  Par
Value		 Book
Value		 Fair
Value
Notes2023 7.875%
 $165,612
 $164,236
 $198,786
Senior Notes2019 9.250%
 292,647
 291,767
 327,057
Senior Notes(1)
2022 3.800%
 150,000
 148,404
 154,449
Junior Subordinated Debentures2052 5.875%
 125,000
 120,954
 126,700
Junior Subordinated Debentures2036 4.620%
(2) 
 20,000
 20,000
 20,000
Junior Subordinated Debentures2056 6.125%
 300,000
 290,445
 321,240
Term loan(3)
2021 2.489%
(4) 
 98,750
 98,750
 98,750
      1,152,009
 1,134,556
 1,246,982
Less current maturity of term loan(3)
     3,750
 3,750
 3,750
Total long-term debt     1,148,259
 1,130,806
 1,243,232

          
Current maturity of term loan(3)
     3,750
 3,750
 3,750
Commercial paper     305,800
 305,252
 305,252
Total short term debt     309,550
 309,002
 309,002

          
Total debt     $1,457,809
 $1,439,808
 $1,552,234

(1)An additional $150 million par value and book value is held by insurance subsidiaries that eliminates in consolidation.
(2) Interest paid at 3 month LIBOR plus 330 basis points, resets each quarter.
(3)
Subsidiary Capital: The currentNational Association of Insurance Commissioners (NAIC) has established a risk-based factor approach for determining threshold risk-based capital levels for all insurance companies. This approach was designed to assist the regulatory bodies in identifying companies that may require regulatory attention. A Risk-Based Capital (RBC) ratio is typically determined by dividing adjusted total statutory capital by the amount of risk-based capital determined using the term loan due of $3.8 millionNAIC’s factors. If a company’s RBC ratio approaches two times the RBC amount, the company must file a plan with the NAIC for improving their capital levels (this level is classifiedcommonly referred to as short term debt.
(4) Interest paid at 1 month LIBOR plus 125 basis points, resets each month.

On April 5, 2016, Torchmark completed the issuance and sale of $300 million aggregate principal amount of Torchmark’s 6.125% Junior Subordinated Debentures due 2056. The Debentures were sold pursuant to Torchmark’s shelf registration statement on Form S-3, filed September 25, 2015. The net proceeds from the sale“Company Action Level” RBC). Companies typically hold a multiple of the Debentures were $290 million, after giving effectCompany Action Level RBC depending on their particular business needs and risk profile.

Our goal is to maintain statutory capital within our insurance subsidiaries at levels necessary to support our current ratings. For 2021, Globe Life has targeted a consolidated Company Action Level RBC ratio of 300% to 320%. The Company concludes that this capital level is more than adequate and sufficient to support its current ratings, given the underwriting discountnature of its business and estimated expensesits risk profile. As of December 31, 2020, our consolidated Company Action Level RBC ratio was 309%. The Parent Company is committed to maintaining the offeringtargeted consolidated RBC ratio at its insurance subsidiaries, and has sufficient liquidity available to provide additional capital if necessary. We continue to monitor for potentially-adverse COVID-19 effects, such as higher policyholder claims, downgrades of fixed income securities within our investment portfolio, and additional credit losses.

Shareholders' Equity. On March 26, 2021, the Debentures. Torchmark used the net proceeds from the offering of the Debentures primarily to repay the $250 million outstanding principal amount plus accrued interest of $8 million on its 6.375% Senior Notes that were due June 15, 2016.
As previously noted under the caption Results of Operationsin this report, we acquired 3.2 million of our outstanding common shares under our share repurchase program during the first nine months of 2017. These shares were acquired at a cost of $243 million (average of $76.46 per share), compared with purchases of 4.2 million shares at a cost of $240 million (average of $57.58 per share) in the first nine months of 2016.
On August 28, 2017, theParent Company announced that it had declared a quarterly dividend of 0.15$0.1975 per share. This dividend was paid on November 1, 2017.April 30, 2021.

Shareholders’ equity was $5.2$7.8 billion at September 30, 2017.March 31, 2021. This compares with $4.6$8.8 billion at December 31, 20162020 and $5.1$6.5 billion at September 30, 2016.March 31, 2020. During the ninethree months since December 31, 2016,2020, shareholders’ equity was

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increased by $442 milliondecreased primarily due to $1.0 billion of after-tax unrealized gainslosses in the fixed-maturity portfolio as interest rates have decreasedincreased over the period. In addition, shareholders' equity was increased by net income of $427 million. Share purchases of $243$179 million noted above during the period reduced shareholders’ equity.quarter, but was offset by share repurchases of $90 million and an additional $43 million in share purchases to counterbalance the dilution from stock option exercises.


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GLOBE LIFE INC.
Management's Discussion & Analysis

We plan to use excess cash available at the Parent Company as efficiently as possible in the future. Possible uses of excess cash flow include, but are not limited to, share repurchases, acquisitions, increases in shareholder dividends, investment in securities, or repayment of short-term debt. We will determine the best use of excess cash after ensuring that targeted capital levels are maintained in our insurance subsidiaries. If market conditions are favorable, we currently expect that share repurchases will continue to be a primary use of those funds.

Globe Life is required byunder GAAP to revalue ourits available for sale fixed maturity portfolio to fair market value at the end of each accounting period. These changes, net of their associated impact on deferred acquisition costs and income tax, are reflected directly in shareholders’ equity.

While GAAP requires our fixed maturity assets to be revalued, it does not permit interest-bearing insurance policy liabilities supported by those assets to be valued at fair value in a consistent manner, with changes in value applied directly to shareholders’ equity. However, due to the size of both the investment portfolio and our policy liabilities, this inconsistency in measurement can have a material impact on shareholders’ equity. Because of the long-term nature of our fixed maturities and liabilities and the strong cash flows generated by our insurance subsidiaries, we have the intent and ability to hold our securities to maturity. As such, we do not expect to incur realized gains or losses due to fluctuations in the market value of fixed maturities caused by interest rate changes or losses caused by temporarily illiquid markets. Accordingly, management removes the effect of this rule when analyzing Torchmark’sthe Company's balance sheet, capital structure, and financial ratios in order to provide a more consistent and meaningful portrayal of the Company’s financial position from period to period.

The following table presents selected data related to our capital resources. Additionally, the table presents the effect of the GAAP requirement to revalue our fixed maturity assetsthis accounting guidance on relevant line items, so that investors and other financial statement users may determine its impact on ourGlobe Life's capital structure. Excluding the effect of unrealized gains and losses on the fixed maturity portfolio from shareholders' equity is considered non-GAAP. Below we include the reconciliation to GAAP.
Selected Financial Data
(Dollar amounts in thousands, except per share data)

AtAt
September 30, 2017 December 31, 2016 September 30, 2016 March 31, 2021December 31, 2020March 31, 2020

GAAP 
Effect of
Accounting
Rule
Requiring
Revaluation(1)
 GAAP 
Effect of
Accounting
Rule
Requiring
Revaluation(1)
 GAAP 
Effect of
Accounting
Rule
Requiring
Revaluation(1)
GAAP
Effect of
Accounting
Rule
Requiring
Revaluation(1)
GAAP
Effect of
Accounting
Rule
Requiring
Revaluation(1)
GAAP
Effect of
Accounting
Rule
Requiring
Revaluation(1)
Fixed maturities$16,652,913
 $1,738,333
 $15,245,861
 $1,057,811
 $15,837,700
 $1,893,233
Fixed maturities$20,154,910 $2,742,951 $21,213,509 $4,019,710 $17,879,541 $1,539,451 
Deferred acquisition costs(2)
3,911,800
 (11,273) 3,783,158
 (10,281) 3,739,526
 (12,698)
Deferred acquisition costs(2)
4,662,509 (5,596)4,595,444 (5,955)4,386,478 (7,095)
Total assets22,993,607
 1,727,060
 21,436,087
 1,047,530
 22,077,031
 1,880,535
Total assets28,112,896 2,737,355 29,046,731 4,013,755 25,351,914 1,532,356 
Short-term debt309,002
 —
 264,475
 —
 266,892
 —
Short-term debt274,919 — 254,918 — 458,127 — 
Long-term debt1,130,806
 —
 1,133,165
 —
 1,133,544
 —
Long-term debt1,668,322 — 1,667,886 — 1,346,795 — 
Shareholders' equity5,167,685
 1,122,589
 4,566,861
 680,894
 5,086,383
 1,222,348
Shareholders' equity7,832,337 2,162,510 8,771,092 3,170,866 6,520,282 1,210,561 
           
Book value per diluted share43.78
 9.51
 37.76
 5.63
 41.94
 10.08
Book value per diluted share75.10 20.74 83.19 30.07 60.98 11.32 
Debt to capitalization(3)
21.8% (4.5)% 23.4% (3.1)% 21.6% (5.0)%
Debt to capitalization(3)
19.9 %(5.6)%18.0 %(7.6)%21.7 %(3.7)%
           
Diluted shares outstanding118,028
   120,958
   121,271
  Diluted shares outstanding104,292 105,429 106,926 
Actual shares outstanding115,359
   118,031
   118,895
  Actual shares outstanding103,193 103,797 106,434 
 
(1)Amount added to (deducted from) comprehensive income to produce the stated GAAP item, per accounting rule ASC 320-10-35-1.
(2)Includes the value of insurance purchased.business acquired (VOBA).
(3) Torchmark’sGlobe Life's debt covenants require that the effect of this accounting rule be removed to determine this ratio. This ratio is computed by dividing total debt by the sum of total debt and shareholders’ equity.


Interest coverage was 10.8 times in the first nine month of 2017, compared with 10.5 times in the 2016 period. Interest coverage is computed by dividing interest expense into the sum of pretax income and interest expense.


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Cautionary Statements
We caution readers regarding certain forward-looking statements contained in the previous discussion and elsewhere in this document, and in any other statements made by, or on behalf of Torchmark whether or not in future filings with the Securities and Exchange Commission. Any statement that is not a historical fact or that might otherwise be considered an opinion or projection concerning Torchmark or its business, whether express or implied, is meant as and should be considered a forward-looking statement. Such statements represent management’s opinions concerning future operations, strategies, financial results or other developments. We specifically disclaim any obligation to update or revise any forward-looking statement because of new information, future developments, or otherwise.
Forward-looking statements are based upon estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control. If these estimates or assumptions prove to be incorrect, the actual results of Torchmark may differ materially from the forward-looking statements made on the basis of such estimates or assumptions. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments, which may be national in scope, related to the insurance industry generally, or applicable to Torchmark specifically. Such events or developments could include, but are not necessarily limited to:
1)Economic and other conditions leading to unexpected changes in lapse rates and/or sales of our policies, as well as levels of mortality, morbidity, and utilization of health care services that differ from Torchmark’s assumptions;
2)Regulatory developments, including changes in governmental regulations (particularly those impacting taxes and changes to the Federal Medicare program that would affect Medicare Supplement);
3)Market trends in the senior-aged health care industry that provide alternatives to traditional Medicare (such as Health Maintenance Organizations and other managed care or private plans) and that could affect the sales of traditional Medicare Supplement insurance;
4)Interest rate changes that affect product sales and/or investment portfolio yield;
5)General economic, industry sector or individual debt issuers’ financial conditions that may affect the current market value of securities we own, or that may impair an issuer’s ability to make principal and/or interest payments due on those securities;
6)Changes in pricing competition;
7)Litigation results;
8)Levels of administrative and operational efficiencies that differ from our assumptions;
9)The ability to obtain timely and appropriate premium rate increases for health insurance policies from our regulators;
10)The customer response to new products and marketing initiatives;
11)Reported amounts in the financial statements which are based on management’s estimates and judgments which may differ from the actual amounts ultimately realized; and
12)Compromise by a malicious actor or other event that causes a loss of secure data from, or inaccessibility to, our computer and other information technology systems.


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Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no quantitative or qualitative changes with respect to market risk exposure during the ninethree months ended September 30, 2017.March 31, 2021.

Item 4. Controls and Procedures
Torchmark,
Evaluation of Disclosure Controls and Procedures: Globe Life, under the direction of the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure that information required to be disclosed by TorchmarkGlobe Life in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to Torchmark’sGlobe Life's management, including the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
As of the end of the fiscal quarter completed September 30, 2017,March 31, 2021, an evaluation was performed under the supervision and with the participation of TorchmarkGlobe Life management, including the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer, of Torchmark’sthe disclosure controls and procedures (as those terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon their evaluation, the Co-Chairmen and Chief Executive Officers and the Executive Vice President and Chief Financial Officer have concluded that Torchmark’s disclosure controls and procedures are effective as of the date of this Form 10-Q. In compliance with Section 302 of the Sarbanes-OxleySarbanes Oxley Act of 2002 (18 U.S.C. §1350)§ 1350), each of these officers executed a Certification included as an exhibit to this Form 10-Q.
For
Changes in Internal Control over Financial Reporting: As of the quarterperiod ended September 30, 2017,March 31, 2021, there have not been any changes in Torchmark’sGlobe Life Inc.'s internal control over financial reporting or in other factors that could significantly affect this control over financial reporting subsequent to the date of their evaluation which have materially affected, or are reasonably likely to materially affect, Torchmark’s internal control over financial reporting. No material weaknesses in such internal controls were identified in the evaluation and as a consequence, no corrective action was required to be taken.

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Part II – II—Other Information

Item 1. Legal Proceedings


Torchmark and its subsidiaries, in common with the insurance industry in general, are subject to litigation, including claims involving tax matters, alleged breaches of contract, torts, including bad faith and fraud claims based on alleged wrongful or fraudulent acts of agents of Torchmark’s subsidiaries, employment discrimination, and miscellaneous other causes of action. Based upon information presently available, and in light of legal and other factual defenses available to Torchmark and its subsidiaries, management does not believe that such litigation will have a material adverse effect on Torchmark’s financial condition, future operating results or liquidity; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future. This bespeaks caution, particularly in states with reputations for high punitive damage verdicts. Torchmark’s management recognizes that large punitive damage awards bearing little or no relation to actual damages continue to be awarded by juries in jurisdictions in which Torchmark and its subsidiaries have substantial business, creating the potential for unpredictable material adverse judgments in any given punitive damage suit.

See further discussion ofDiscussion regarding litigation and unclaimed property audits is provided in Note 6—5—Commitments and ContingenciesContingencies.



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Item 1A. Risk Factors
Torchmark
The Company had no material changes to its risk factors.

Item 2. Changes inUnregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity Securities

(c)    Purchases of Certain Equity Securities by the Issuer and Others for the First Quarter of 2021
Period
(a) Total Number
of Shares
Purchased
(b) Average
Price Paid
Per Share
(c) Total Number of
Shares Purchased as 
Part of Publicly Announced
Plans or Programs
(d) Maximum Number
of Shares (or
Approximate Dollar
Amount) that May
Yet Be Purchased
Under the Plans or
Programs
January 1-31, 2021315,768 $94.92 315,768 
February 1-28, 2021426,625 94.69 426,625 
March 1-31, 2021636,798 97.91 636,798 
Period 
(a) Total Number
of Shares
Purchased
 
(b) Average
Price Paid
Per Share
 
(c) Total Number of
Shares Purchased as Part
of Publicly Announced
Plans or Programs
 
(d) Maximum Number
of Shares (or
Approximate Dollar
Amount) that May
Yet Be Purchased
Under the Plans or
Programs
July 1-31, 2017 148,621
 $78.04
 148,621
  
August 1-31, 2017 775,262
 77.79
 775,262
  
September 1-30, 2017 337,147
 76.48
 337,147
  

At its On August 7, 2017meeting,5, 2020, the Globe Life Board of Directors reaffirmed its continued authorization of the Company’s shareCompany's stock repurchase program in amounts and with timing that management, in consultation with the Board, determinesdetermined to be in the best interest of the Company. The program has no defined expiration date or maximum shares to be repurchased.

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Item 6. Exhibits
 
(a)Exhibits
(31.1)Exhibit No.Description
31.1
31.2
(31.2)31.3
(31.3)
Rule 13a-14(a)/15d-14(a) Certification by Frank M. Svoboda
(32.1)32.1
(101)101.INSXBRL Instance Document- the instance document does not appear in the Interactive Data Files forfile because the Torchmark Corporation Form 10-Q forXBRL tags are embedded within the period ended September 30, 2017Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).



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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
GLOBE LIFE INC.
TORCHMARK CORPORATION
Date: May 5, 2021
Date: November 7, 2017/s/ Gary L. Coleman
Gary L. Coleman
Co-Chairman and Chief Executive Officer
Date: November 7, 2017May 5, 2021/s/ Larry M. Hutchison
Larry M. Hutchison
Co-Chairman and Chief Executive Officer
Date: November 7, 2017May 5, 2021/s/ Frank M. Svoboda
Frank M. Svoboda
Executive Vice President and Chief Financial Officer


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